Blackwell Automotives balance sheet at the end of its most recent fiscal year shows the following information:
Question:
In addition, it was reported that the firm had a net income of $156,042 on net sales of $4,063,589.
a. What are the firms current ratio and quick ratio?
b. Calculate the firms days sales outstanding, total asset turnover ratio, and fixed asset turnover ratio.
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio.
Blackwell Automotive Balance Sheet as of March 31, 2017 Liabilities and Equity: Assets: Cash and marketable securities Accounts receivable $ 23,015 141,258 212,444 $ 376,717 Accounts payable and accruals $ 163,257 21,115 Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total liabilities and equity $ 184,372 168,022 Inventory Total current assets Net plant and equipment Goodwill and other assets $ 352,394 313,299 711,256 89,879 512,159 $1,177,852 $1,177,852 Total assets
Step by Step Answer:
a b Current ratio Quick ratio Cur...View the full answer
Fundamentals of Corporate Finance
ISBN: 978-1119371403
4th edition
Authors: Robert Parrino, David S. Kidwell, Thomas Bates
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
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