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Accounts payable.......................................................... $ 52,000 Accounts receivable...................................................... 84,500 Cash............................................................................... 147,20

Accounts payable.......................................................... $ 52,000 Accounts receivable...................................................... 84,500 Cash............................................................................... 147,200 Market price/share....................................................... 65.00 Net sales........................................................................ 590,000 Other current liabilities................................................. 22,500 Net income.................................................................... 174,000 Salaries payable ............................................................ 19,600 Shareholders’ equity..................................................... 310,900 Total assets................................................................... 500,000 Weighted average number of common shares............ 4,000 Instructions Calculate the following ratios: (Hint: Remember: Total Assets = Total Liabilities + Shareholder’s equity). (a) Current ratio (b) Profit Margin (c) Basic earnings per share (d) Debt to total assets

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Answer #1

Note :

  • Current Assets = Accounts receivable + Cash = $84,500 + $147,200 = $231,700
  • Current Liabilities = Accounts payable + Salaries payable + Other current liabilities = $52,000 + $19,600 + $22,500 = $94,100
  • Total Liabilities = $500,000 - $310,900 = $189,100

Answer (a) . Current ratio = Current Assets / Current Liabilities = $231,700 / $94,100 = 2.46

Answer (b) Profit Margin = Net income / Net sales = $174,000 / $590,000 = 29.49 %

Answer (c) Basic earnings per share = Net income / Weighted average number of common shares

= $174,000 / 4,000 = $43.50 per share

Answer (d) Debt to total assets = Total liabilities / Total assets = $189,100 / $500,000 = 37.82 %

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