# Computation of ratios and missing information

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201-

Return on Equity = ROE =25%

Net Profit Margin = NPM=5%

Total Asset Turnover = TAT=2

Inventory = $4,000

Accounts Receivables = $2,500

Sales = $50,000,

Current Liabilities = $5,000

Net Working Capital = NWC = $2,000

All sales are on credit.

Assume no prepaid expenses.

Assume 365 days

Compute the following:

1. Debt ratio,

2. Debt/equity ratio

3. Equity multiplier

4. Total assets

5. Total debt

6. Long term debt

7. If total assets comprise of CA and Fixed Assets, compute Fixed Assets

8. Current ratio, quick ratio

9. Accounts Receivable Turnover, Average Collection Period

10. Return on Assets = ROA

205

Given the following information for O'Hara Marine Co., calculate the depreciation expense: Sales = $29,000, Costs = $13,000, Transfer to RE = $500, Dividend paid = $900, Interest Expense = $1,600, Tax Rate = 35%

Hint: first write down the headings for the Income Statement and then work your way from bottom to top, one step at a time.

Note that, Market price per share is same as price per share is same as market value per share.

https://brainmass.com/business/financial-ratios/computation-ratios-missing-information-586255

#### Solution Preview

201-

Return on Equity = ROE =25%

Net Profit Margin = NPM=5%

Total Asset Turnover = TAT=2

Inventory = $4,000

Accounts Receivables = $2,500

Sales = $50,000,

Current Liabilities = $5,000

Net Working Capital = NWC = $2,000

All sales are on credit.

Assume no prepaid expenses.

Assume 365 days

Before computing the ratios, we have to find the hidden information.

Sales = $50,000 and net profit margin = 5% and therefore, net profit = 50,000*5% = $2,500

Total asset turnover = Sales / Total assets = 50,000/ Total assets = 2; So, total assets = 50,000/2=$25,000

NWC = Current assets - Current liabilities Current assets - 5,000 = 2,000; So, current assets = $7,000

ROE = Net income/Equity = 2,500 / Equity = 25%; So, equity = 2,500/.25 = ...

#### Solution Summary

This solution shows step-by-step computations the determines the required ratios and missing information.