(L04) (Ratio Computations and Discussion) Sprague Company has been operating for several years, and on December 31, 2017, presented the following balance sheet.

The net income for 2017 was $25,000. Assume that total assets are the same in 2016 and 2017.
Instructions Compute each of the following ratios. For each of the four, indicate the manner in which it is computed and its significance as a tool in the analysis of the financial soundness of the company.

(a) Current ratio.

(c) Debt to assets ratio.

(b) Acid-test ratio.

(d) Return on assets.

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SPRAGUE COMPANY BALANCE SHEET DECEMBER 31, 2017 Cash Receivables $ 40,000 Accounts payable $ 80,000 75,000 Mortgage payable 140,000 Inventory 95,000 Common stock ($1 par) 150,000 Plant assets (net) 220,000 Retained earnings 60,000 $430,000 $430,000