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Liquidity & profitability ratios

Table 6
Advance Corporation Comparative Balance Sheet
For the Years Ending March 31, 1996 and 1997
(Millions of Dollars)
Assets 1996 1997
Current assets:
Cash $ 2 $ 10
Accounts receivable 16 10
Inventory 22 26
Total current assets $ 40 $ 46
Gross fixed assets: $120 $124
Less accumulated depreciation 60 64
Net fixed assets 60 60
Total assets $100 $106
Liabilities and Owners' Equity
Current liabilities:
Accounts payable $ 16 $ 18
Notes payable 10 10
Total current liabilities $ 26 $ 28
Long-term debt 20 18
Owners' equity:
Common stock 40 40
Retained earnings 14 20
Total liabilities and owners' equity $100 $106

Advance Corporation had net income of $26 million for 1996 and paid total cash dividends of $20 million to their common stockholders.

Calculate the following financial ratios for the Advance Corporation using the information given in Table 6 and 1997 information.
current ratio
acid test ratio
debt ratio
long-term debt to total capitalization
return on total assets
return on common equity

Solution Summary

The answer contains the computation of current ratio, acid test ratio, debt ratio, long-term debt to total capitalization,return on total assets, return on common equity.

$2.19