Question

Sharp Uniforms designs, manufactures, and implements corporate identity uniform programs that it rents or sells to customers throughout the United States and Canada. Selected information from the company’s balance sheet follows.

SHARP (in millions)
	Current Year			Last Year
Select Income Statement Information
Net revenue	$	4,588		$	4,352
Cost of goods sold		2,691			2,565
Selling, general, and administrative expenses		1,321			1,258
Interest expense		108			106
Income tax expense		251			238
Net income		410			369
Select Statement of Cash Flows Information
Cash paid for interest		83			87
Cash flows from operating activities		698			607
Select Balance Sheet Information
Cash and equivalents		549			424
Marketable securities		—			24
Accounts receivable		544			559
Inventories		287			294
Prepaid expense and other current assets		62			43
Accounts payable		240			139
Current accrued expenses		467			414
Current portion of long-term debt		19			44
Other current liabilities		138			103
Long-term debt		1,390			1,337

Receivable turnover ratio.  

Inventory turnover ratio.

Current ratio.

Times interest earned ratio.

Cash coverage ratio.

Answer 1

3. Current Ratio

Current Assets	Amount
Cash and equivalents	549
Marketable securities	-
Accounts Receivable	544
Inventories	287
Prepaid expenses and other current assets	62
Total current assets	1,442

Current liabilities	Amount
Accounts Payable	240
Current accrued expenses	467
Curent portion of long-term debt	19
Other current liabilities	138
Total current liabilities	864

Current Ratio = Current assets / Current liabilities

= 1442 / 864

= 1.67

4. Times Interest Earned Ratio

Net income before interest and tax / Interest Expense

= 769 / 108

= 7.12 times

Computation of net income before interest and tax

Particulars	Amount
Net income	410
Add : Interest expense	108
Income Tax expense	251
Net income before interest and tax	769

5. Cash coverage ratio

Cash flow from operating activities / Interest expense

= 698 / 108

= 6.46