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# Ratios

Airline Company Balance Sheet

As of December 31, 2003

Assets

Cash........................................................... \$ 30,000

Account receivable....................................... 50,000

Inventory..................................................... 80,000

Net plant and equipment............................... 200,000

Total Assets.............................................\$ 360,000

Liabilities and Stockholders' Equity

Accounts Payable....................................... \$ 50,000

Accrued expenses....................................... 30,000

Long-term debt............................................ 120,000

Common stock............................................. 60,000

Paid-in capital............................................... 20,000

Retained earning........................................... 80,000

Total liabilities and Stockholders' Equity.... \$360,000

Airline Company Income Statement

For Year Ended December 31, 2003

Sales (on credit)............................................. \$ 720,000

Cost of goods sold.......................................... 500,000

Gross profit....................................................\$ 220,000

Depreciation................................................... 40,000

Operating profit............................................... \$ 160,000

Interest expense.............................................. 16,000

Profit before tax.............................................. 144,000

Taxes (50 percent).......................................... 72,000

Net income..................................................... \$ 72,000

The firm's average collection period is?

Airline Company's current ratio?

Times interest earned for the company is?

The firm's debt to asset ratio is?

Compute Airline Company's after tax profit margin?

The firm's receivable turnover is?

#### Solution Preview

Current Ratio is calculated by dividing the current assets by current liabilities
Current Ratio = Current Assets /Current Liabilities
Current assets are cash, inventory and receivables = 30,000+50,000+80,000=160,000
Current ...

#### Solution Summary

The solution explains the calculation of various ratios

\$2.19