Tabor Company has just prepared the following comparative annual financial statements for the current year:

Required:
1. Using average balances for balance sheet accounts and year-end balances for all income statement accounts, compute the following ratios for the current year:
ASSET TURNOVER RATIOS
1. Total asset turnover
2. Fixed asset turnover
3. Receivables turnover
4. Inventory turnover
LIQUIDITY RATIOS
5. Current ratio
6. Quick ratio
7. Cash ratio
SOLVENCY RATIO
8. Times interest earned
9. Cash coverage ratio
10. Debt to equity ratio
Assume cash flows from operating activities were $14,600 and cash paid for interest was $3,800.
2. Comment on the receivables turnover and inventory turnover ratios. Any concerns?

Transcribed Image Text:

TABOR COMPANY Comparative Income Statement For the Years Ended December 31 Sales revenue (one-half on credit) Cost of goods sold Gross profit Expenses (including $4,000 interest expense each year) Pretax income Income tax expense (30%) Net income Current Year $110,000 52,000 58,000 40,000 18,000 5,400 $ 12,600 Prior Year $99,000 48,000 51,000 37,000 14,000 4,200 $ 9,800