Question

Sandhill Automotive’s balance sheet at the end of its most recent fiscal year shows the following information: Sandhill Automotive Balance Sheet as of March 31, 2017 Assets: Liabilities and Equity: Cash and marketable sec. $38,000 Accounts payable and accruals $163,000 Accounts receivable 166,000 Notes payable 28,000 Inventory 227,000 Total current assets $431,000 Total current liabilities $191,000 Long-term debt 166,000 Total liabilities $357,000 Net plant and equipment 710,000 Common stock 310,000 Goodwill and other assets 99,000 Retained earnings 573,000 Total assets $1,240,000 Total liabilities and equity $1,240,000 In addition, it was reported that the firm had a net income of $178,000 on net sales of $4,200,000.

What are the firm’s current ratio and quick ratio? (Round answers to 2 decimal places, e.g.15.25.)

Current Ratio			times
Quick Ratio			times

Calculate the firm’s days’ sales outstanding, total asset turnover ratio, and fixed asset turnover ratio. (Round answers to 2 decimal places, e.g.15.25. Use 365 days for calculation.)

Days Sales Outstanding			days
Total Asset Turnover			times
Fixed Asset Turnover			times

Answer 1

a). Current ratio = Current assets/Current Liabilities

Firm's Current ratio = $431,000/$191,000

= 2.26 times

Quick ratio = (Current assets - Inventory)/Current Liabilities

Firm's Quick ratio = ($431,000 - $227,000)/$191,000

= 1.07 times

b). Day's sales Outstanding = (Accounts Receivables/Net sales)*365 days

Firm's Day's sales Outstanding = ($166,000/$4200,000)*365 days

= 14.43 days

- Total Asset Turnover Ratio = Net sales/Total Assets

= $4200,000/$1240,000

= 3.39 times

- Fixed Assets Turnover ratio = Net sales/Net Fixed Assets(i.e., Plant & equipment in this case)

= $4200,000/$710,000

= 5.92 times

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