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Wamser Company: Prepare Selected Ratios

The following information pertains to Wamser Company:

Cash $ 40,000
Accounts receivable 125,000
Merchandise inventory 75,000
Plant assets (net) 360,000
Total assets $600,000
Accounts payable $ 55,000
Accrued taxes and expenses payable 25,000
Long-term debt 120,000
Common stock ($10 par) 160,000
Paid-in capital in excess of par 40,000
Retained earnings 200,000
Total equities $600,000

Net sales (all on credit) $900,000
Cost of goods sold 675,000
Net income 72,000

Instructions

Compute the following: (It is not necessary to use averages for any balance sheet figures involved.)

(a) Current ratio
(b) Inventory turnover
(c) Receivables turnover
(d) Book value per share
(e) Earnings per share
(f) Debt to total assets
(g) Profit margin on sales
(h) Return on common stock equity

Solution Preview

(a) Current Ratio = Current Assets /Current Liabilities
Current Assets = Cash + AR + Inventory = 40,000+125,000+75,000 = $240,000
Current Liabilities = Accounts Payable + Accrued taxes and expenses payable = 55,000+25,000=$80,000
Current ...

Solution Summary

The solution provides formula and calculations for the required ratios.

$2.19