Question

Bethesda Mining Company reports the following balance sheet information for 2015 and 2016.

BETHESDA MINING COMPANY Balance Sheets as of December 31, 2015 and 2016
	2015				2016					2015				2016
Assets									Liabilities and Owners’ Equity
Current assets									Current liabilities
Cash	$	55,526			$	70,205			Accounts payable	$	188,922			$	196,611
Accounts receivable		63,281				83,639			Notes payable		84,020				135,588
Inventory		121,382				186,805			Total	$	272,942			$	332,199
Total	$	240,189			$	340,649			Long-term debt	$	235,000			$	171,750
									Owners’ equity
									Common stock and paid-in surplus	$	220,000			$	220,000
Fixed assets									Accumulated retained earnings		170,594				206,478
Net plant and equipment	$	658,347			$	589,778			Total	$	390,594			$	426,478
Total assets	$	898,536			$	930,427			Total liabilities and owners’ equity	$	898,536			$	930,427

Based on the balance sheets given for Bethesda Mining, calculate the following financial ratios for each year:

a. Current ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Current ratio
2015		times
2016		times

b. Quick ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Quick ratio
2015		times
2016		times

c. Cash ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Cash ratio
2015		times
2016		times

d. Debt?equity ratio and equity multiplier. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Debt?equity ratio				Equity multiplier
2015			times				times
2016			times				times

e. Total debt ratio. (Do not round intermediate calculations and round your answers to 2 decimal places, e.g., 32.16.)

	Total debt ratio
2015			times
2016			times

Answer 1

a) Current Ratio = Current assets / Current liabilities

2015 = $240189 / $272942 = 0.88

2016 = $340649 / $332199 = 1.03

b) Quick ratio = (Current assets - Inventory) / Current liabilities

2015 = ($240189 - $121382) / $272942 = 0.44

2016 = ($340649 - $186805) / $332199 = 0.46

c) Cash ratio = Cash / Current liabilities

2015 = $55526 / $272942 = 0.20

2016 = $70205 / $332199 = 0.21

d) Debt - Equity ratio = Total Debt / Total owner's Equity

2015 = ($272942 + $235000) / $390594 = 1.30

2016 = ($332199 + $171750) / $426478 = 1.18

Equity multiplier = Total Assets / Total owner's equity

2015 = $898536 / $390594 = 2.30

2016 = $930427 / $426478 = 2.18

Equity multiplier can also be computed as (1 + Debt - Equity ratio)

e) Total debt ratio = Total debt / Total assets

2015 = ($272942 + $235000) / $898536 = 0.57

2016 = ($332199 + $171750) / $930427 = 0.54