Question

Exercise 3-17 (Algo) Calculating ratios; Bargain Deal [LO3-8] Bargain Deal, Inc., is a leading retailer specializing...

Exercise 3-17 (Algo) Calculating ratios; Bargain Deal [LO3-8]

Bargain Deal, Inc., is a leading retailer specializing in consumer electronics. A condensed income statement and balance sheet for the fiscal year ended January 28, 2017, are shown below.

Bargain Deal, Inc.
Balance Sheet
At January 28, 2017
($ in millions)
Assets
Current assets:
Cash and cash equivalents $ 2,146
Short-term investments 1,322
Accounts receivable (net) 1,247
Inventory 5,068
Other current assets 426
Total current assets 10,209
Long-term assets 3,718
Total assets $ 13,927
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable $ 5,300
Other current liabilities 4,175
Total current liabilities 9,475
Long-term liabilities 2,250
Shareholders’ equity 2,202
Total liabilities and shareholders’ equity $ 13,927
Bargain Deal, Inc.
Income Statement
For the Year Ended January 28, 2017
($ in millions)
Revenues $ 39,613
Costs and expenses 38,170
Operating income 1,443
Other income (expense)* (82 )
Income before income taxes 1,361
Income tax expense 758
Net income $ 603


*Includes $233 of interest expense.
  
Required:
1-a. Calculate the current ratio for Bargain Deal for its fiscal year ended January 28, 2017.
1-b. Calculate the acid-test ratio for Bargain Deal for its fiscal year ended January 28, 2017.
1-c. Calculate the debt to equity ratio for Bargain Deal for its fiscal year ended January 28, 2017.
1-d. Calculate the times interest earned ratio for Bargain Deal for its fiscal year ended January 28, 2017.

(For all requirements, round your answers to 2 decimal places.)

Homework Answers

Answer #1

Answer-1-a)- Current Ratio= Current Assets/ Current Liabilities

= $10209/$9475

= 1.08 times

1-b)- Acid-test (Quick ratio)= (Current assets – Inventory - Prepaid expenses)/Current Liabilities

= ($10209 - $5068 - $0)/$9475

= $5141/$9475

= 0.54 times

1-c)- Debt to equity ratio= Total liabilities/Total stockholder’s equity

= ($9475 + $2250)/$2202

= $11725/$2202

= 5.32 times

1-d)- Times interest earned ratio= Income before Interest & Taxes(EBIT)/Interest expenses

= ($603+$233+$758)/$233

= $1594/$233

= 6.84 times

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