# ch12 hw answers - 2005 Ratio–06 Ratio-05 Current assets...

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CHAPTER 12 HOMEWORK: Multiple Choice (Page 641): 1 . a 2. d 3. d 4. d 5. c 6. b 7. a 8. b 9. a 10. b E12-5A Calculate the current ratio and the amount of working capital for Albert's Hotels for the years given in the following comparative balance sheets. Although two years is not much of a trend, what is your opinion about the direction of these ratios? Current 2006 2005 ratio Current assets \$396,000 \$382,000 1.92 2006 Current liabilities 206,000 223,000 1.71 2005 Current assets \$396,000 \$382,000 Current liabilities 206,000 223,000 \$190,000 \$159,000 Both the current ratio and the amount of working capital increased in 2006. Both measures indicate that the company is more liquid in 2006 than in 2005 so appears to be more financially healthy.

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E12-7A Calculate the following ratios: a. Current ratio 2006
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Unformatted text preview: 2005 Ratio–06 Ratio-05 Current assets \$174,369 \$124,369 2.43 1.83 Current liabilities 71,616 68,001 b. Accounts receivable turnover ratio 2006 Ratio - 06 Net credit sales \$712,855 23.57 Avg. net AR 30,245 c. Inventory turnover ratio 2006 Ratio - 06 Cost of goods sold \$483,463 4.38 Avg. inventory 110,315 d. Debt to equity ratio 2006 2005 Ratio–06 Ratio-05 Total liabilities \$83,932 \$103,201 0.69 0.52 Total SE 121,851 198,935 e. Return on equity ratio 2006 Ratio - 06 Net income \$11,953 0.07 Avg. Common SE 160,393 Do any of these ratios suggest problems for the company? The ratios indicate that the company has acceptable liquidity and solvency. However, the proportion of debt financing has increased, increasing risk....
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ch12 hw answers - 2005 Ratio–06 Ratio-05 Current assets...

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