Compute the firms acid test ratio

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Reference no: EM131967967

Last year, the Allen Corporation had sales of $12.3 million with a cost of goods sold of $3,750,000. The firm's operating expenses were $2,660,000, and its increase in retained earnings was $525,000.

There are currently 100,000 common stock shares outstanding and the firm pays a $2.20 dividend per share. The firm had $11 million in assets of which half was in current assets.

Also the debt ratio (Debt/Assets) was 35%. It is known that 40% of the company debt was in current liabilities.

(a) Assuming the firm's earnings are taxed at 34% (effective tax rate), construct the firm's income statement

(b) Compute the firm's operating profit margin.

(d) Compute the firm's acid test ratio. Show your calculation.

Reference no: EM131967967

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