Reference no: EM132746172

The following items are taken from the financial statements of Grove Company for 2017:

Accounts receivable 8,000

Accounts payable $18,500

Accumulated depreciation-equipment 4,800

Bonds payable 18,000

Cash 24,000

Common stock 25,000

Cost of goods sold 27,000

Depreciation expense 4,800

Dividends 5,300

Equipment 44,000

Interest expense 2,500

Patents 7,500

Retained earnings, January 1 16,000

Salaries and wages expense 5,200

Sales revenue 50,500

Supplies 4,500

Problem 1: Compute the appropriate financial ratios relevant to each of the following descriptions:

1. A measure of liquidity designed to assess the ability of the firm to pay its' short-term obligations using its current assets.
2. A leverage ratio (debt management ratio)that determines what portion of the assets is financed by debt.
3. An efficiency ratio that captures the credit policy of the firm and measures the average number of days it takes for the firm to collect accounts receivable from customers.
4. A profitability ratio that tells us for every dollars of sales revenue how much operating profit the firm has generated.
5. A very important financial ratio for stock market investors that shows them for every dollar they invest in the company's stock how much income it can generate.