Question

The 2018 balance sheet for Hallbrook Industries, Inc., is shown below.

HALLBROOK INDUSTRIES, INC.
Balance Sheet
December 31, 2018
($ in 000s)
Assets
Cash	$	370
Short-term investments		320
Accounts receivable		370
Inventories		340
Property, plant, and equipment (net)		2,700
Total assets	$	4,100
Liabilities and Shareholders’ Equity
Current liabilities	$	570
Long-term liabilities		520
Paid-in capital		1,600
Retained earnings		1,410
Total liabilities and shareholders’ equity	$	4,100

The company’s 2018 income statement reported the following amounts ($ in 000s):

Net sales	$	6,300
Interest expense		50
Income tax expense		160
Net income		330

Required:
1. Calculate the current ratio. (Round your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)
3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)

Answer 1

1
Cash	370
Short-term investments	320
Accounts receivable	370
Inventories	340
Total Current Assets	1400
Divide by Current liabilities	570
Current ratio	2.46
2
Cash	370
Short-term investments	320
Accounts receivable	370
Total Quick Assets	1060
Divide by Current liabilities	570
Acid-test ratio	1.860
3
Total Debt	1090	=570+520
Divide by Total Equity	3010	=1600+1410
Debt to equity ratio	0.36
4
Net income before interest and tax	540	=330+50+160
Divide by Interest expense	50
Times interest earned ratio	10.8	times