Exercise - Selected Financial Ratios
The financial statements for Castile Products, Inc., are given below:
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Castile Products, Inc. Balance Sheet December 31
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Assets
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Current assets:
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Cash
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$6,500
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Accounts receivable, net
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35,000
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Merchandise inventory
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70,000
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Prepaid expenses
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3,500
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Total current assets
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115,000
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Property and equipment, net
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185,000
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Total assets
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$300,000
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Liabilities and Stockholders' Equity
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Liabilities:
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Current liabilities
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$50,000
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Bonds payable, 10%
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80,000
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Total liabilities
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130,000
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Stockholders' equity:
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Common stock, $5 par value
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$30,000
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Retained earnings
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140,000
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Total stockholders' equity
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170,000
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Total liabilities and equity
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$300,000
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Castile Products, Inc. Income Statement For the Year Ended December 31
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Sales
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$420,000
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Cost of goods sold
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292,500
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Gross margin
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127,500
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Selling and administrative expenses
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89,500
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Net operating income
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38,000
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Interest expense
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8,000
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Net income before taxes
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30,000
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Income taxes (30%)
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9,000
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Net income
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$21,000
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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.)