a. Current ratio is 0.80.
b. Acid-test ratio is 0.46
.
Heritage Mills
Balance Sheet
December 31, 2016
(in thousands)
Assets
Liabilities
Cash
$55Total Current Liabilities
$2,500
Accounts Receivables
1,095Long-term Note Payable
1,200
Merchandise Inventory
700Other Long-term Liabilities
700
Prepaid Expenses
150
Total Liabilities
4,400
Total Current Assets
2,000
Plant Assets, Net
2,850
Stockholders' Equity
Other Assets
2,250
Stockholders' Equity
2,700
Total Assets
$
7,100
Total Liabilities and Stockholders'
Equity
$
7,100
E15-19 (similar to)
Data for Research
Enterprises follows:
2017
2016
2015
Total Current Assets
$410,000
$300,000
$260,000
Total Current Liabilities
195,000
150,000
130,000
Compute the dollar amount of change and the percentage of change in Research Enterprises's
working capital each year during 2017and 2016
. What do the calculated changes indicate?
Begin by selecting the formula to compute the working capital, the dollar amount of change and the percentage of
change in Research
Enterprises' working capital.
Begin by selecting the formula to compute the working capital, the dollar amount of change and
the percentage of change in
Expert
Enterprises' working capital.
Working capital
=
Current assets - Current liabilities
Dollar amount of
change
=
Later period amount - Earlier period amount
Percentage of change
=
(Dollar amount of change / Base period amount) x 100

First, calculate the amount and percentage of change in working capital in 2016
(Round the percentage to one decimal place, X.X%.)
The amount of change in working capital is $
20,000. The percentage of change in working capital
is
15.4%.
Next, calculate the amount and percentage of change in working capital in 2017.
(Round the percentage to one decimal place, X.X%.)
The amount of change in working capital is $
65,000.The percentage of change in working capital
is
43.3%.
What do the calculated changes indicate?
Expert
Enterprises' working capital has
improved
year over year from 2015to 2017.
E15-20
The financial statements of Jim'sNatural Foods include the following items:
Current Year
Preceding Year
Balance Sheet:
Cash
$25,000
$26,000
Short-term Investments
9,000
20,000
Net Accounts Receivables
54,000
82,000
Merchandise Inventory
68,000
80,000
Prepaid Expenses
11,000
7,000
Total Current Assets
167,000
215,000
Total Current Liabilities
140,000
83,000
Income Statement:
Net Credit Sales
$480,000
Cost of Goods Sold
313,000
a.
Current ratio
e.
Days' sales in inventory
b.
Cash ratio
f.
Days' sales in receivables
c.
Acid-test ratio
g.
Gross profit percentage
d.
Inventory turnover
a. Compute the current ratio for the current year. (Abbreviations used: STI = Short-term investments. Round your
answer to two decimal places, X.XX.)
Current ratio
=
Total current assets / Total current liabilities
=
1.19
b. Compute the cash ratio for the current year. (Round your answer to two decimal places, X.XX.)
Cash ratio
=
(Cash + Cash equivalents) / Total current liabilities
=
0.18
c. Compute the acid-test ratio for the current year. (Round your answer to two decimal places, X.XX.)
Acid-test ratio
=
(Cash + STI + Net current receivables) / Total current liabilities
=
0.63
d. Compute the inventory turnover for the current year. (Round your answer to two decimal places, X.XX.)
Inventory turnover
=
Cost of goods sold / Average merchandise inventory
=
4.23time
e. Compute the days' sales in inventory for the current year. (Round intermediary calculations to two decimal places,

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