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AC202 Sando Company analysis

AC202 Sando Company analysis - =(\$148000-\$61000/\$62000...

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Use the balance sheets of Sando shown below to calculate the following ratios for 2008 (round to the hundredths): (a) Current ratio. (b) Acid-test ratio. (c) Debt ratio. (d) Equity ratio. Solution (a) Current ratio. Current ratio = Current assets /Current liabilities Current assets =Cash +account receivables+ Merchandised inventory +Prepaid insurance Current assets (2008) = 43000+38000+61000+6000 =\$148000 Current Ratio =\$148000/\$62000 =2.387 =2.39 (b) Acid-test ratio Acid test ratio = (Current assets- Merchandised inventory) /Current liabilities

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Unformatted text preview: . = (\$148000-\$61000)/\$62000 =\$87000/\$62000= 1.403 =1.40 (c) Debt ratio. Debt ratio = Total debts /Total assets Total debts = Current liabilities +Long term liabilities = \$62000+\$45000 =\$107000 Total assets =\$415000 Debt ratio = \$107000/\$415000 =0.2578 = 25.78% =26% (approximately) (d) Equity ratio. Equity ratio = Equity /Total assets Equity =Common stock +Retained earnings =\$150000 +\$158000 =\$308000 Equity ratio = 308000/415000 =0.7422 = 74.22% =74% (approximately)...
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