HQ Company€™s condensed financial statements provide the following information.

INCOME STATEMENT
FOR THE YEAR ENDED 2014
Sales ................. $2,608,000
Cost of goods sold .......... (1,673,000)
Gross profit ............ 935,000
Selling and administrative expense ..... (581,000)
Interest expense ........... (26,000)
Net income ............ $ 328,000

Instructions
(a) Determine the following for 2014.
(1) Current ratio at December 31.
(2) Acid-test ratio at December 31.
(3) Accounts receivable turnover.
(4) Inventory turnover.
(5) Rate of return on assets.
(6) Profit margin on sales.
(b) Prepare a brief evaluation of the financial condition of HQ Company and of the adequacy of itsprofits.

Transcribed Image Text:

HQ COMPANY BALANCE SHEET Dec. 31, 2014 $ 8,000 151,000 50,000 300,000 12,000 $521,000 460,000 $981,000 Dec. 31, 2013 $25,000 112,000 31,000 268,000 9,000 $445,000 420,000 $865,000 Cash Accounts receivable (net) Short-term investments Inventories Prepaid expenses Total current assets Property, plant, and equipment (net) Total assets Current liabilities Bonds payable Common stockholders' equity 277,000 250,000 454,000 $981,000 201,000 260,000 404,000 $865,000 Total liabilities and stockholders' equity