Reference no: EM131585377

Exercise - Selected Financial Ratios

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash	$6,500
Accounts receivable, net	35,000
Merchandise inventory	70,000
Prepaid expenses	3,500
Total current assets	115,000
Property and equipment, net	185,000
Total assets	$300,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$50,000
Bonds payable, 10%	80,000
Total liabilities	130,000
Stockholders' equity:
Common stock, $5 par value	$30,000
Retained earnings	140,000
Total stockholders' equity	170,000
Total liabilities and equity	$300,000

 

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$420,000
Cost of goods sold	292,500
Gross margin	127,500
Selling and administrative expenses	89,500
Net operating income	38,000
Interest expense	8,000
Net income before taxes	30,000
Income taxes (30%)	9,000
Net income	$21,000

Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. All sales were on account.

Required: Compute the following financial data and ratios:

1. Working capital.

2. Current ratio. (Round your answer to 1 decimal place.)

3. Acid-test ratio. (Round your answer to 2 decimal places.)

4. Debt-to-equity ratio. (Round your answer to 2 decimal places.)

5. Times interest earned ratio. (Round your answer to 2 decimal places.)

6. Average collection period. (Use 365 days in a year. Round your answer to 1 decimal place.)

7. Average sale period. (Use 365 days in a year. Round your intermediate and final answer to 1 decimal place.)

8. Operating cycle. (Round your intermediate calculations and final answer to 2 decimal places.)