Homework Answers
1.) Current ratio = current assets/current liabilities
Toulouse Co. = 906,000/291,000 = 3.11 : 1
Lautrec Co. = 1,188,000/361,000 = 3.29 : 1
2.) Acid test ratio = (current assets - inventory)/current liabilities
Toulouse Co. = (906,000 - 564,000)/291,000 = 1.18 : 1
Lautrec Co. = (1,188,000 - 541,000)/361,000 = 1.79 : 1
3.) Account receivable turnover = net credit sales/average receivable
Note:- Sales are all on Account
:- Beginning Account receivable is not given, so ending is used
Toulouse Co. = 918,000/226,000 = 4.06 times
Lautrec Co. = 1,556,000/315,000 = 4.94 times
4.) Inventory turnover = cost of goods sold/average inventory
Note:- Cost of goods sold is 70% and 60% of sales for Toulouse and Lautrec co. respectively
:- beginning inventory is not given, so ending is used only
Toulouse Co. = (918,000 x 70%)/564,000 = 1.14 times
Lautrec Co. = (1,556,000 x 60%/541,000 = 1.73 times
5.) Cash to current liabilities = Cash/current liabilities
Toulouse Co. = 116,000/291,000 = 0.40 : 1
Lautrec Co. = 332,000/361,000 = 0.92 : 1
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Cash
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Receivables
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289,000
Inventories
576,000
495,000
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406,000
489,000
Capital stock and retained earnings
684,000
885,000
Total liabilities and stockholders’ equity
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$1,529,000
Rate of gross profit on sales
30
%
40
%...
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Total current assets
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