Use the financial statements of Allstott, Inc., in exercises 10-6 and 10-7.

1. Compute the company's debt ratio at December \(31,2020\).

2. Compute the company's times-interest-earned ratio for 2020. For operating income, use income before both interest expense and income taxes. You can simply add interest expense back to income before taxes.

3. Is Allstott's ability to pay liabilities and interest expense strong or weak? Comment on the value of each ratio computed for questions 1 and 2 .

Exercises 10-6

Use the Allstott, Inc., balance sheet data below.

1. Compute Allstott, Inc.'s quick (acid-test) ratio at December 31, 2020 and 2019.

2. Use the comparative information from the table on page 597 for Baker, Inc., Calvin Company, and Dunn Companies Limited. Is Allstott's quick (acid-test) ratio for 2020 and 2019 strong, average, or weak in comparison?

Exercises 10-7

Use the Allstott 2020 income statement that follows and the balance sheet from exercise 10-6 to compute the following:

a. Allstott's rate of inventory turnover and days inventory outstanding for 2020

b. Days' sales in average receivables (days sales outstanding) during 2020 (round dollar amounts to one decimal place)

c. Accounts payable turnover and days' payables outstanding

d. Length of cash conversion cycle in days Do these measures look strong or weak? Give the reason for your answer.

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Dollarama Inc. Notes to Consolidated Financial Statements January 28, 2018 and January 29, 2017 (Expressed in thousands of Canadian dollars, unless otherwise noted) 3 Summary of significant accounting policies (cont'd) Property, plant and equipment Property, plant and equipment are carried at cost and depreciated on a straight-line basis over the estimated useful lives of the assets as follows: Store and warehouse equipment Vehicles Building and roof Leasehold improvements Computer equipment 10 to 15 years 5 years 20-50 years Lease term 5 years The Corporation recognizes in the carrying amount of property, plant and equipment the full purchase price of assets acquired or constructed as well as the costs incurred that are directly incremental as a result of the construction of a specific asset, when they relate to bringing the asset into working condition. Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalized. The rate for calculating the capitalized financing cost is based on the Corporation's weighted average cost of borrowing experienced during the reporting period. The Corporation also capitalizes the cost of replacing parts of an item when that cost is incurred, if it is probable that the future economic benefits embodied within the item will flow to the Corporation and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized.