Question

Following is the balance sheet of Faustin Company’s for 2014. FAUSTIN COMPANY'S Balance sheet   Assets   Cash...

Following is the balance sheet of Faustin Company’s for 2014.
FAUSTIN COMPANY'S
Balance sheet
  Assets
  Cash $ 14,900
  Marketable securities 7,540
  Accounts receivable 12,560
  Inventory 10,850
  Property and equipment 171,000
  Accumulated depreciation (12,700 )
  Total assets $ 204,150
  Liabilities and Stockholders’ Equity
  Accounts payable $ 8,360
  Current notes payable 3,120
  Mortgage payable 4,450
  Bonds payable 21,480
  Common stock 113,500
  Retained earnings 53,240
  Total liabilities and stockholders’ equity $ 204,150

The average number of common stock shares outstanding during 2014 was 870 shares. Net income for the year was $15,100.
Required

Compute each of the following: (Round your answers to 2 decimal places.)
a. Current ratio
b. Earnings per share per share
c. Quick (acid-test) ratio
d. Return on investment %
e. Return on equity %
f. Debt to equity ratio %
Business   Accounting   
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Homework Answers

Answer #1
Current Year Calculation
Current Ratio(Current Assets / Current Liabilities) 2.88 $45,850 / $15,930
Earnings per share(Net Income / Average no. of common stock) $17.36 $15,100/870 shares
Acid-test Ratio[(Current Assets - Inventories - Prepaid expenses)/Current laibilities] 2.20 ($45,850 - $10,850)/$15,930
Return on Investment(Net income / Total assets) 7.40% $15,100 / $204,150
Return on equity(Net Income / Average Stockholders equity) 9.06% $15,100 / $166,740
Debt to Equity ratio(Total Liabilities / Total shareholder's equity) 22.44% $37,410 / $166,740
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