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    Financial Ratios calculation

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    Table 1 (use for Problems 24-27)
    Smith Company Balance Sheet

    Assets:
    Cash and marketable securities $300,000
    Accounts receivable 2,215,000
    Inventories 1,837,500
    Prepaid expenses 24,000
    Total current assets $3,286,500
    Fixed assets 2,700,000
    Less: accumulated depreciation 1,087,500
    Net fixed assets $1,612,500
    Total assets $4,899,000
    Liabilities:
    Accounts payable $240,000
    Notes payable 825,000
    Accrued taxes 42,500
    Total current liabilities $1,107,000
    Long-term debt 975,000
    Owner's equity 2,817,000
    Total liabilities and owner's equity $4,899,000
    Net sales (all credit) $6,375,000
    Less: Cost of goods sold 4,312,500
    Selling and administrative expense 1,387,500
    Depreciation expense 135,000
    Interest expense 127,000
    Earnings before taxes $412,500
    Income taxes 225,000
    Net income $187,500
    Common stock dividends $97,500
    Change in retained earnings $90,000

    24. Based on the information in Table 1, the current ratio is:
    a. 2.97.
    b. 1.46.
    c. 2.11.
    d. 2.23.

    25. Based on the information in Table 1, and using a 360-day year, the average collection period is:
    a. 71 days.
    b. 84 days.
    c. 64 days.
    d. 125 days.

    26. Based on the information in Table 1, the debt ratio is:
    a. 0.70.
    b. 0.20.
    c. 0.74.
    d. 0.42.

    27. Based on the information in Table 1, the net profit margin is:
    a. 4.61%.
    b. 2.94%.
    c. 1.97%.
    d. 5.33%.

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    https://brainmass.com/business/business-math/financial-ratios-calculation-245527

    Solution Preview

    Answers.

    24. Current ratio = Current assets / Current liabilities
    = $3,286,500 / $1,107,000
    = 2.9688 or approximate to 2.97

    Thus, the answer is = a. 2.97.

    25. average collection ...

    Solution Summary

    This solution is comprised of the step-by-step calculation of the current ratio, the average collection period, debt ratio, and the net profit margin.

    $2.19

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