Charina Marie F.

Acain

Assignment #5: Financial Ratios 11/02/2023

6-11
A. Working Capital
Current Assets - Current Liabilities
1,052.820 - 459,842 = 529,978

B. Current Ratio
Current Assets
Current Liabilities
1,052,820 = 2.29
459,842

C. Acid-Test Ratio
Current Asset - Inventory
Current Liabilities
1,052,820-523,000 = 1.15
459,842

D. Cash Ratio
Cash and Cash equivalents
Current Liabilities
33,491 = 0.07
459,842

E. Day's sales in receivable

Gross receivables
Net sales / 365
255,000 = 30.51 or 31 days
3,050,600 / 365

F. Accounts receivable turnover in days

Average gross receivable
Net sales / 365
271,500 = 32.48 or 32 days
3050,500/365

G. Day's sales in inventory

Ending inventory
COGS / 365
523,000 = 87.36 or 87 days
2,185,100 / 365

H.Inventory Turnover in days

Average Inventory
Cost of Goods Sold / 365
544,000 = 90. 87 or 91 days
5,986.58

I. Operating Cycle
Accounts Receivable Turnover in days + Inventory Turnover in days
32.48+ 90.87 = 123.35 or 123 days

6 - 15
А.
1. Working Capital
Current Assets - Current Liabilities
2007 = 500,000 - 340,000 = 160,000
2006 = 400,000 - 300,000 = 100,000

Smith Corporation's working capital at the end of 2007 and the end of 2006 Smith Corporation's
working capital was $160,000 at the end of 2007 and $100,000 at the end of 2006. It suggests
that the company is in good financial shape with respect to liquidity.

2. Current Ratio
Current Assets
Current Liabilities
2007 = 500,000
340,000
= 1.47
2006 = 400,000
300.000
= 1.33
The current ratio of Smith corporation at the end of 2007 and 2006. For Smith corporation, The
current ratio was 1.47 at the end of 2007 and 1.33 at the end of 2006. Which indicates positive
trend considering liquidity.

3. Acid-Test Ratio
Current Asset - Inventory
Current Liabilities
2007 = 500,000 - 250,000
340,000
= 0.74
2006 = 400,000-200,000
300,000
 = 0.67

Smith Corporation's acid-test ratio at the end of 2007 and 2006. The acid-test ratio for Smith
Corporation was 0.74 at the end of 2007 and 0.67 at the end of 2006. Because the ratio is less
than one, we cannot conclude that it is negative.

4. Accounts Receivable Turnover

Net sales
Average gross receivable
2007 = 1,400,000
107,500
= 13.02
2006 = 1,500,000
115,000
= 13.04
The accounts receivable turnover of Smith corporation between 2006 and 2007 from 13.04 time
per year to 13.02 times per year. For Smith corporation, this would be a negative trend.

5. Merchandise Inventory turnover

Cost of Goods Sold
Average Inventory
2007 = 1,120,000
225,000
= 4.98
2006 = 1,020,000
240,000
= 4.25
Smith Corporation's merchandise inventory turnover at the end of 2007 and 2006 Smith
Corporation's merchandise inventory turnover was 4.98 in 2007 and 4.25 in 2006, indicating that
the higher the merchandise inventory turnover, the more profitable the company is.

6. Inventory Turnover in days

Average Inventory
COGS / 365
2007
225,000
1,120,000 / 365
= 73.33

2006
240,000
1,020,000 / 365
= 85.88
The Inventory turnover of Smith corporation between 2006 and 2007 from 85.88 to 73.33
decreased which is unfavorable for smith corporation.

8-3
A. Return on Assets ( using ending assets)
Net Income
Total Assets
120,000 = 4%
3,000,000

B. Return on Total Equity (using ending total equity)

Net Income
Total Equity
120,000 - 15,000 = 5.83%
1,800,000

C. Return on Common Equity (using ending common equity)

Net Income
Total Common Equity
120,000 - 15,000 = 7%
1,500,000

D. Times interest earned

EBIT
Interest
245,000 = 5.44
45,000