Question

Requirement 1a. Compute the current ratios for 2018 and 2017 Begin by selecting the formula to compute the current ratio Current ratio

Answer 1

Compute the ratios as follows: a. Current ratio Current assets - Current liabilities Total current - liabilities b. Cash ratio Cash and cash equivalents Interest expense + Net income + Income tax expense c. Times-interest-earned-ratio = d. Inventory turnover e. Gross profit percentage f. Debt to equity ratio = Cost of goods sold = Gross profit = Total liabilities - Interest expense [(Beg. Inventory+ - End. Inventory)=2] + Net sales revenue Total equity Rate of return on common g. stockholders' equity Net income - Preferred = dividend Average common stockholders' equity Weighted average number of common - shares outstanding Earnings per share of h. common stock Net income - Preferred dividend i. Price/earnings ratio Market price of share - Earning per share

2017 $378,000 = a. Current ratio $247,000 = 1.530364 III b. Cash ratio $90,000 - $247,000 = 0.364372 Times-interest-earned- c. ratio $77,000 = $14,000 = 5.5 $216,000 = $209,000 = $341,000 - $184,500 = $425,000 = $216,000 = 1.170732 0.491765 1.578704 d. Inventory turnover | = e. Gross profit percentage = f. Debt to equity ratio Rate of return on common stockholders' g. equity = $30,880 = $104,000/= 0.296923 Earnings per share of h. common stock (not $30,880 - available) = (not (not available) = available) = i. Price/earnings ratio

2018 $368,000 - $91,000 - $227,000 = $227,000 = 1.621145 0.400881 a. Current ratio = b. Cash ratio = Times-interest-earned- C. ratio = d. Inventory turnover = e. Gross profit percentage = f. Debt to equity ratio = Rate of return on common stockholders' g. equity Earnings per share of h. common stock $95,000 - $238,000 = $229,000 = $343,000 - $13,000 = $158,000 = $467,000 = $237,000 = 7.307692 1.506329 0.490364 1.447257 0.448835 $55,880 = $124,500 = (not $55,880 = available) = (not (not available) = available) = i. Price/earnings ratio = available 2 (a) The debt equity ration in 2017 is 1.57 improve to 1.44 in 2018. The current ration in 2017 is 1.53 improve to 1.62 in 2018. From the above improvements it is concluded that ability to meet debts and liabilities of company has been improved in 2018 from 2017. Further, inventory turnover ratio in 2017 is 1.17 improved to 1.50 in 2018. The rate of return on equity in 2017 is 29.69% improved to 44.88% in 2018.

2(b) Details are missing. Note: Outstanding shares and market price of shares are not available in the question, hence some parts could not be solved.