Question 1:
Score 1/1
Your response
Correct response
Calculating Liquidity Ratios
SDJ, Inc., has net working capital of $1,000, current liabilities of $4,000, and inventory of $1,500.
(Round answers
to 2 decimal places.)
The current ratio is
1.25
(50%) times.
The quick ratio is
0.88
(50%) times.
Calculating Liquidity Ratios
SDJ, Inc., has net working capital of $1,000, current liabilities of $4,000, and inventory of $1,500.
(Roun
to 2 decimal places.)
The current ratio is
1.25
times.
The quick ratio is
0.88
times.
Feedback:
To find the current assets, we must use the net working capital equation. Doing so, we find:
NWC = Current assets
−
Current liabilities
$1,000 = Current assets
−
$4,000
Current assets = $5,000
Now, use this number to calculate the current ratio and the quick ratio. The current ratio is:
Current ratio = Current assets / Current liabilities
Current ratio = $5,000 / $4,000
Current ratio = 1.25 times
And the quick ratio is:
Quick ratio = (Current assets
−
Inventory) / Current liabilities
Quick ratio = ($5,000
−
1,500) / $4,000
Quick ratio = 0.88 times
Question 2:
Score 1/1
Your response
Correct response
Calculating Profitability Ratios
Tinker's Bells has sales of $26 million, total assets of $35 million, and total debt of $10 million. If the profit
margin is 11 percent, the net income is $
2860000
(33%)
(Enter your answer in dollars, not millions of
dollars. Omit the "$" sign in your response.)
, ROA is
8.17
(33%) percent, and ROE is
11.44
(33%)
percent.
(Round ROA and ROE to 2 decimal places, without the percent sign.)
Calculating Profitability Ratios
Tinker's Bells has sales of $26 million, total assets of $35 million, and total debt of $10 million. If the profit
margin is 11 percent, the net income is $
2860000
(Enter your answer in dollars, not millions of dollars
Omit the "$" sign in your response.)
, ROA is
8.17
percent, and ROE is
11.44
percent.
(Round ROA a
ROE to 2 decimal places, without the percent sign.)
Feedback:
To find the return on assets and return on equity, we need net income. We can calculate the net income using
the profit margin. Doing so, we find the net income is:
Profit margin = Net income / Sales
0.11 = Net income / $26,000,000
Net income = $2,860,000
Now we can calculate the return on assets as:
ROA = Net income / Total assets
ROA = $2,860,000 / $35,000,000
ROA = 0.08171 or 8.17%
We do not have the equity for the company, but we know that equity must be equal to total assets minus total
debt, so the ROE is:
ROE = Net income / (Total assets – Total debt)
ROE = $2,860,000 / ($35,000,000 – 10,000,000)
ROE = 0.1144 or 11.44%
Question 3:
Score 1/1
Your response
Correct response
Calculating the Average Collection Period
Pujols Lumber Yard has a current accounts receivable balance of $360,000. Credit sales for the year just
ended were $2,988,000.
(Round your answers to 2 decimal places.)
The receivables turnover is
8.3
(33%) times. Days' sale in receivables is
43.98
(33%) days. It took
44
(33%)
days on average for credit customers to pay off their accounts during the past year.
Calculating the Average Collection Period
Pujols Lumber Yard has a current accounts receivable balance of $360,000. Credit sales for the year just
ended were $2,988,000.