Question

The 2021 balance sheet for Hallbrook Industries, Inc., is shown below.

HALLBROOK INDUSTRIES, INC.
Balance Sheet
December 31, 2021
($ in thousands)
Assets
Cash	$	290
Short-term investments		240
Accounts receivable		290
Inventory		380
Property, plant, and equipment (net)		1,900
Total assets	$	3,100
Liabilities and Shareholders’ Equity
Current liabilities	$	490
Long-term liabilities		440
Paid-in capital		1,200
Retained earnings		970
Total liabilities and shareholders’ equity	$	3,100

The company’s 2021 income statement reported the following amounts ($ in thousands):

Net sales	$	5,500
Interest expense		80
Income tax expense		190
Net income		250

Required:
1. Calculate the current ratio. (Round your answer to 2 decimal places.)
2. Calculate the acid-test ratio. (Round your answer to 3 decimal places.)
3. Calculate the debt to equity ratio. (Round your answer to 2 decimal places.)
4. Calculate the times interest earned ratio. (Round your answer to 1 decimal place.)

1. Current ratio 2. Acid-test ratio 3. Debt to equity ratio 4. Times interest earned ratio times

Answer 1

1)
Current Asstes
	Cash	$                         290
	Short-term investments	$                         240
	Accounts receivable	$                         290
	Inventory	$                         380
	Total	$                     1,200
	Current Ratio = Current Assets / Current Liabilities
	= $1200/490
	=2.45 times
2)	Quick Assets
	Cash	$                         290
	Short-term investments	$                         240
	Accounts receivable	$                         290
	Total	$                         820
	Acid test Ratio = Quick Assets / Current Liabilities
	= $820/490
	=1.673 times
3)	Debt To Equity Ratio = Total Debt / Total Equity
	= ($1200+970)/2170
	= $930/2170
	=0.43 times
4)	Times Interest Earned Ratio = EBIT/ Interest expenses
	= ($250+190+80) /80
	= $520/80
	=6.5 times