Question

21. Evian Science Inc. ($ thousands) Income Statement for the year ending Dec. 31, 2017 Net...

21.

Evian Science Inc. ($ thousands)

Income Statement for the year ending Dec. 31, 2017

Net Sales

25,000

Cost of Goods Sold

15,320

Depreciation

4,700

Earnings before interest and taxes

4,980

Interest Expenses

950

Earnings before tax

4,030

Tax

1,370

Earnings after tax

2,660

Dividends

900

Balance Sheet as of Dec. 31, 2017

Cash

550

Accounts Payable

2,775

Accounts receivable

1,360

Long-term debt

4,750

Inventory

3,410

Common stock

7,500

    Total current assets

5,320

Retained earnings

2,250

Net fixed assets

11,955

Total assets

17,275

Total liab. & equity

17,275


Please refer to Evian Science's financial statements above. What was Evian Science's current ratio at the end of 2017?
       1.92
       2.13
       1.80
       1.15
Question 22. 22. Please refer to the financial data for Evian Science (in Question 21). Assume a 365-day year for your calculations. Evian Science's collection period in days, based on sales, at the end of 2017 is:
       22.37
       21.64
       30.78
       19.86
Question 23. 23. Please refer to Evian Science's financial statements (in Question 21). Assume a constant profit margin and dividend payout ratio, and further assume all of Evian Science's assets and current liabilities vary directly with sales. Assume long-term debt and common stock remain unchanged. Sales are projected to increase by 25 percent. What is Evian Science's external financing need for next year?
       -$817
       $1,425
       $1,300
       $982
       $668

Homework Answers

Answer #1

Q21. Solution: (values in Thousands of dollars)

Current Ratio is calculated to check the short-term liquidity position of the company.

Current Assets = $5,320

Current Liabilities = Accounts payable = $2,775

Current Ratio = $5,320 / $2,775

Current Ratio = 1.917 or 1.92

So, the correct option is (a) 1.92

Q22. Solution: (values in thousands of dollars, except number of days)

Average collection period (ACP) is number of days it takes to collect money from customers after sale.

Average collection period = 0.0544 x 365

Average collection period = 19.856 or 19.86 days

So, the correct option is (d) 19.86 days.

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