5.3 Financial Ratios

Financial statements for Paulson's Pet Store are shown.

Paulson's Pet Store Income Statement For Year Ended December 31, 20--
Revenue from sales:
Sales			$326,050
Less: Sales returns and allowances			5,360
Net sales				$320,690
Cost of goods sold:
Merchandise inventory, January 1, 20--		$29,300
Estimated returns inventory, January 1, 20--		900	$30,200
Purchases		$162,640
Less: Purchases returns and allowances	$4,080
Less: Purchases discounts	3,200	7,280
Net purchases		$155,360
Add freight-in		1,600
Cost of goods purchased			156,960
Goods available for sale			$187,160
Less: Merchandise inventory, December 31, 20--		$24,900
Less: Estimated returns inventory, December 31, 20--		1,100	26,000
Cost of goods sold				161,160
Gross profit				$159,530
Operating expenses:
Wages expense			$69,300
Advertising expense			1,300
Supplies expense			800
Phone expense			2,736
Utilities expense			2,864
Insurance expense			1,600
Depreciation expense-building			10,000
Depreciation expense-store equipment			1,800
Miscellaneous expense			600
Total operating expenses				91,000
Income from operations				$68,530
Other expenses:
Interest expense				650
Net income				$67,880

Paulson's Pet Store Statement of Owners Equity For Year Ended December 31, 20--
B. Paulson, capital, January 1, 20--		$464,920
Add additional investments		40,000
Total investment		$504,920
Net income for the year	$67,880
Less: Withdrawals for the year	4,900
Increase in capital		62,980
B. Paulson, capital, December 31, 20--		$567,900

Paulson's Pet Store Balance Sheet December 31, 20--
Assets
Current assets:
Cash		$23,440
Accounts receivable		59,350
Merchandise inventory		24,900
Estimated returns inventory		1,100
Supplies		2,500
Prepaid insurance		1,800
Total current assets			$113,090
Property, plant, and equipment:
Land		$90,000
Building	$350,000
Less: Accumulated depreciation	20,000	330,000
Store Equipment	$120,000
Less: Accumulated depreciation	3,600	116,400	536,400
Total assets			$649,490
Liabilities
Current liabilities:
Note payable	$2,000
Accounts payable	59,560
Customer refunds payable	1,500
Wages payable	1,100
Sales tax payable	3,430
Total current liabilities		$67,590
Long-term liabilities:
Note payable	$16,000
Less: Current portion	2,000	14,000
Total liabilities			$81,590
Owner's Equity
B. Paulson, capital			567,900
Total liabilities and owner's equity			$649,490

All sales are credit sales. The Accounts Receivable balance on January 1, 20--, was $10,100.

Required:

Compute the financial ratios. Round answers to one decimal place.

Current ratio _______to 1

Quick ratio ________to 1

Working capital $_______

Return on owner's equity ______%

Accounts receivable turnover _______

Average number of days to collect receivables_______ days

Inventory turnover _____

Average number of days to sell inventory________ days