Question

Wiemers Corporation’s comparative balance sheets are presented below. WIEMERS CORPORATION Balance Sheets December 31 2017 2016 Cash $ 4,500 $ 3,200 Accounts receivable (net) 20,800 23,300 Inventory 10,100 7,200 Land 19,500 26,400 Buildings 70,000 70,000 Accumulated depreciation—buildings (14,600 ) (10,600 ) Total $110,300 $119,500 Accounts payable $ 12,700 $ 31,100 Common stock 74,900 68,600 Retained earnings 22,700 19,800 Total $110,300 $119,500 Wiemers’s 2017 income statement included net sales of $110,000, cost of goods sold of $60,800, and net income of $15,000. Compute the following ratios for 2017. (Round answers to 2 decimal places, e.g. 1.65, or 1.65% .) Current ratio :1 Acid-test ratio :1 Accounts receivable turnover times Inventory turnover times Profit margin % Asset turnover times Return on assets % Return on common stockholders’ equity % Debt to assets ratio

Answer 1

Answer and Explanation:

According to the scenario, formula and the computation of the given data are as follow:-

Current Ratio = Current Assets ÷ Current Liabilities

where,

Currents assets for year is

= Cash + Account Receivable(Net) + Inventory

= $4,500 + $20,800 + $10,100

= $35,400

And, the current liabilities is $ 12,700

So, the current ratio is

= $35,400 ÷ $12,700

= 2.79 times

Acid Test Ratio (2017) = (Accounts Receivable + Cash) ÷ (Current Liabilities)

= ($20,800+$4,500) ÷ ($12,700)

= $25,300 ÷ $12,700

= 1.99 times

Accounts Receivable Turnover is

= Sales ÷ (Opening Receivable + Closing Receivable ÷ 2)

= $110,000 ÷ ($23,300 + $20,800 ÷ 2)

= $110,000 ÷ $22,050

= 4.99 Times

Inventory Turnover Times is

= Cost of Goods Sold ÷ (Opening Inventory + Closing Inventory ÷ 2)

= $60,800 ÷ ($7,200 + $10,100 ÷ 2)

= $60,800 ÷ $8,650

= 7.03 Times

Profit Margin is

= Profit ÷ Sales × 100

= $15,000 ÷ $110,000 × 100

= 13.64%

Assets Turnover is

= Sales ÷ (Opening Assets + Closing Assets ÷ 2)

= $110,000 ÷ ($119,500 + $110,300 ÷ 2)

= $110,000 ÷ $114,900

= 0.96 Times

Return on Assets is

= Profit ÷ (Opening Assets + Closing Assets ÷ 2)

= $15,000 ÷ ($119,500 + $110,300 ÷ 2)

= $15,000 ÷ $114,900

= 13.05%

As we know that

Equity = Common Stock + Retained Earnings

Opening Equity is

= $68,600 + $19,800

= $88,400

Closing Equity is

= $74,900 + $22,700

= $97,600

Return on Common Stock Holder’s Equity is

= Profit ÷ (Opening Equity + Closing Equity ÷ 2)

= $15,000 ÷ ($88,400 + $97,600 ÷ 2)

=$15,000 ÷ $93,000

= 16.13%

Debt to Asset Ratio is

= Borrowing ÷ Assets

= 0 ÷ $110,300

= 0

By calculating these ratios we can analysis the organization financial profitability, liquidity, financial performance, and financial position. These ratios gives the exact picture of the company.