Calculating the current ratio for Yellowstone Wolves Pty Ltd

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Reference no: EM133065517

Question - Yellowstone Wolves Pty Ltd began operations on 1 January 2020. Below is selected information from their comparative financial statements for the year ended 31 December 2021:

 

2021

2020

Cash assets

$28,000

$30,000

Receivables

70,000

65,000

Inventories

56,000

58,000

Property, plant and equipment (net)

63,000

66,000

Accounts Payable

22,000

25,000

Short-term Loan

20,000

24,000

Non-Current Liabilities

63,000

60,000

Revenue

240,000

250,000

Less: Cost of Sales

130,000

140,000

Gross Profit

110,000

110,000

Other Expenses

43,000

48,000

Profit

67,000

62,000

Required -

a) Calculate the following ratios for the year ended 2021 (to 1 decimal place).

1. Profit margin ratio.

2. Current ratio.

3. Receivables turnover ratio.

4. Inventory turnover ratio.

5. The debt ratio.

b) After calculating the current ratio for Yellowstone Wolves Pty Ltd, the owner decided that the company was in a sound position for paying its liquid liabilities. As their bookkeeper discuss the limitations of the owner's conclusion.

Reference no: EM133065517

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