Current ratio, acid ratio, debt to total assets
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(Ratio Computations and Discussion)
Costner Company has been operating for several years, and on December 31, 2010, presented the following balance sheet.
COSTNER COMPANY
Balance Sheet
December 31, 2010
Cash $40,000
Receivables 75,000
Inventories 95,000
Plant Assets (net) 220,000
Total $430,000
Accounts payable $70,000
Mortgage payable 140,000
Common stock ($1 par) 160,000
Retained earnings 60,000
Total $430,000
The net income for 2010 was $25,000. Assume that total assets are the same in 2009 and 2010.
Compute each of the following ratios. (Round all answers to 2 decimal places, e.g. 1.50.)
a.Current ratio.
b.Acid-test ratio.
c.Debt to total assets. %
d.Rate of return on assets. %
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Solution Summary
Response explains Current ratio, acid ratio, debt to total assets, rate of return on assets
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a.Current ratio.
= Current assets/Current Liabilities
=(40000+75000+95000)/70000
3.00
b.Acid-test ratio.
=Quick ...
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