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    Selected Financial Ratios [L03, l04]
    The financial statements for Castile Products, Inc., an importer of consumer products, are given below:
    Castile Products, Inc.
    Balance Sheet December 31
    Assets
    Current assets:
    Cash .
    Accounts receivable, net .
    Merchandise inventory .
    Prepaid expenses .
    Total current assets .
    Property and equipment, net .
    Total assets .
    $ 6,500 35,000 70,000 3,500
    115,000 185,000
    $300,000
    (continued)

    (concluded)
    Castile Products, Inc.
    Balance Sheet December 31
    Liabilities and Stockholders' Equity Liabilities:
    Current liabilities .
    Bonds payable, 10% .
    Total liabilities .
    Stockholders' equity:
    Common stock, $5 per value .
    Retained earnings .
    Total stockholders' equity .
    Total liabilities and stockholders' equity .
    $ 30,000 140,000
    $ 50,000 80,000
    130,000
    170,000 $300,000
    Castile Products, Inc.
    Income Statement
    For the Year Ended December 31
    Sales .
    Cost of goods sold .
    Gross margin .
    Operating expenses .
    Net operating income .
    Interest expense .
    Net income before taxes .
    Income taxes (30%) .
    Net income .
    $420,000 292,500
    127,500 89,500
    38,000 8,000
    30,000 9,000
    $ 21,000
    Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. All sales were on account.

    Compute financial ratios as follows:
    Acid-test (quick) ratio.

    Average collection period.

    Average sale period.

    Times interest earned.

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    https://brainmass.com/business/financial-ratios/ratio-calculation-151382

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    Solution Preview

    Selected Financial Ratios [L03, l04]
    The financial statements for Castile Products, Inc., an importer of consumer products, are given below:
    Castile Products, Inc.
    Balance Sheet December 31
    Assets
    Current assets:
    Cash .
    Accounts receivable, net .
    Merchandise inventory .
    Prepaid expenses .
    Total current assets .
    Property and equipment, net .
    Total assets .
    $ 6,500 35,000 70,000 3,500
    115,000 185,000
    $300,000
    (continued)

    (concluded)
    Castile Products, Inc.
    Balance Sheet December 31 ...

    Solution Summary

    The solution explains how to calculate the following ratios for Castile Products - Acid-test (quick) ratio, Average collection period, Average sale period and Times interest earned.

    $2.49

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