Share
Explore BrainMass

Calculating Ratios

42. From the following information, compute the ratios indicated. Assume the average for the year is the same as the ending balances for the balance sheet accounts. Round percentages to one decimal place. Show your work.

Westwood Corporation

Balance Sheet

December 31, 20xx

Assets

Cash $ 15,000

Marketable securities 10,000

Accounts receivable (net) 20,000

Inventory 30,000

Prepaid expenses 8,000

Property, plant, and equipment 117,000

Total assets $200,000

Liabilities and Stockholders' Equity

Current liabilities $ 30,000

Long-term liabilities 50,000

Stockholders' equity 120,000

Total liabilities and stockholders' equity $200,000

Westwood Corporation

Income Statement

For the Year Ended December 31, 20xx

Net sales $160,000

Cost of goods sold 120,000

Gross margin $ 40,000

Operating Expenses

Selling & administrative expenses $16,000

Interest expense 8,000 24,000

Income before income taxes $ 16,000

Income taxes 4,000

Net income $ 12,000

Westwood had 4,000 shares of common stock issued and outstanding. The market price of common stock at year end was $15 per share. Dividends paid in 20xx were $.60 per share.

Calculate the following ratios:

1. Current ratio 6. Asset turnover
2. Quick ratio 7. Return on assets
3. Receivable turnover 8. Return on equity
4. Inventory turnover 9. Debt to equity ratio
5. Profit margin

Solution Preview

1.Current Ratio

Current assets
Current liabilities

=15,000 + 10,000+20,000+30,000+8,000
30,000

= 2.77

2.Quick ratio

Cash + Marketable securities+Receivables
Current ...

Solution Summary

This posting calculates ratios for Westwood Corporation .

$2.19