Share
Explore BrainMass

# Ratio calculation

**********
Exercise 14-7
Bennis Company has the following comparative balance sheet data.
BENNIS COMPANY
Balance Sheet
December 31

2012 2011
Cash \$15,000 \$30,000
Receivables (net) 70,000 60,000
Inventories 60,000 50,000
Plant assets (net) 200,000 180,000
\$345,000 \$320,000
Accounts payable \$50,000 \$60,000
Mortgage payable (15%) 100,000 100,000
Common stock, \$10 par 140,000 120,000
Retained earnings 55,000 40,000
\$345,000 \$320.00

1. Net income was \$25,000.
2. Sales on account were \$410,000. Sales returns and allowances were \$20,000.
3. Cost of goods sold was \$198,000.
4. The allowance for doubtful accounts was \$2,500 on December 31, 2012, and \$2,000 on December 31, 2011.

Instructions:
Compute the following ratios at December 31, 2012.
(a) Current.
(b) Acid-test.
(c) Receivables turnover.
(d) Inventory turnover.

Exercise 14-9
The income statement for Christensen, Inc. appears below.
CHRISTENSEN, INC.
Income Statement
For the Year Ended December 31, 2011

Sales \$400,000
Cost of goods sold 230,000
Gross profit 170,000
Expenses (including \$16,000 interest and \$24,000 income taxes) 105,000
Net income \$65,000

1. The weighted-average common shares outstanding in 2011 were 30,000 shares.
2. The market price of Christensen, Inc. stock was \$13 in 2011.
3. Cash dividends of \$26,000 were paid, \$5,000 of which were to preferred stockholders.

Instructions:
Compute the following ratios for 2011.
(a) Earnings per share.
(b) Price-earnings.
(c) Payout.
(d) Times interest earned.

#### Solution Preview

Problem 1
(a) Current Ratio = Current Assets/Current Liabilities = (15,000 cash + 70,000 receivables + 60,000 inventories)/50,000 accounts payable = 2.9

(b) Acid-test ratio = Quick Assets/Current Liabilities = (15,000 cash + 70,000 receivables)/50,000 accounts ...

#### Solution Summary

The solution explains how to calculate the required ratios

\$2.19