Exercise 15-8 Selected Financial Ratios [LO15-2, LO15-3, LO15-4]

The financial statements for Castile Products, Inc., are given below:

Castile Products, Inc.

Balance Sheet

December 31AssetsCurrent assets:Cash$21,000Accounts receivable, net170,000Merchandise inventory380,000Prepaid expenses6,000Total current assets577,000Property and equipment, net840,000Total assets$1,417,000Liabilities and Stockholders' EquityLiabilities:Current liabilities$260,000Bonds payable, 11%330,000Total liabilities590,000Stockholders' equity:Common stock, $10 par value$190,000Retained earnings637,000Total stockholders' equity827,000Total liabilities and stockholders' equity$1,417,000

Castile Products, Inc.

Income Statement

For the Year Ended December 31Sales$3,150,000Cost of goods sold1,332,000Gross margin1,818,000Selling and administrative expenses560,000Net operating income1,258,000Interest expense36,300Net income before taxes1,221,700Income taxes (30%)366,510Net income$855,190

Account balances at the beginning of the year were: accounts receivable, $180,000; and inventory, $360,000. All sales were on account.

Required:

Compute the following financial data and ratios:

1. Working capital.

2. Current ratio.(Round your answer to 1 decimal place.)

3. Acid-test ratio.(Round your answer to 2 decimal places.)

4. Debt-to-equity ratio.(Round your answer to 2 decimal places.)

5. Times interest earned ratio.(Round your answer to 2 decimal places.)

6. Average collection period.(Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

7. Average sale period.(Use 365 days in a year. Round your intermediate calculations and final answer to 1 decimal place.)

8. Operating cycle.(Round your intermediate calculations and final answer to 1 decimal place.)