Question

The 2018 balance sheet for Hallbrook Industries, Inc., is shown below. HALLBROOK INDUSTRIES, INC. Balance Sheet...

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

HALLBROOK INDUSTRIES, INC. Balance Sheet December 31, 2018 ($ in 000s)

Assets

Cash $ 200

Short-term investments 150

Accounts receivable 200

Inventories 350

Property, plant, and equipment (net) 1,000

Total assets $ 1,900

Liabilities and Shareholders’ Equity

Current liabilities $ 400

Long-term liabilities 350

Paid-in capital 750

Retained earnings 400

Total liabilities and shareholders’ equity $ 1,900

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

Net sales $ 4,600

Interest expense 40

Income tax expense 100

Net income 160

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.)

1. Current ratio

2. Acid-test ratio

3. Debt to equity ratio

4. Times interest earned ratio .........times

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Homework Answers

Answer #1
Cash 200
Short term investment 150
Accounts receivable 200
Inventory 350
Total current assets 900
Current liabilities 400
1 Current ratio = Current assets / current Liabilities
Current ratio 2.25
2 Acid test ratio = (current assets - inventory )/ current liabilities
Acid test ratio 1.38
3 Debt to equity ratio = Total liabilities / stockholders equity
Total liabilities 750 (400+350)
Stockholders equity 1150 (700+450)
Debt equity ratio 0.65
4 Times interest charged = EBIT / interest expense
EBIT = net income + income tax + interest expense
Interest expense 40
EBIT 300 (160+100+40)
Times interest charged 7.5 times
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