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 31
Assets
Current assets:
Cash	$	24,000
Accounts receivable, net		190,000
Merchandise inventory		330,000
Prepaid expenses		9,000
Total current assets		553,000
Property and equipment, net		870,000
Total assets	$	1,423,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	240,000
Bonds payable, 8%		310,000
Total liabilities		550,000
Stockholders equity:
Common stock, $10 par value	$	110,000
Retained earnings		763,000
Total stockholders equity		873,000
Total liabilities and stockholders equity	$	1,423,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	3,060,000
Cost of goods sold		1,172,500
Gross margin		1,887,500
Selling and administrative expenses		630,000
Net operating income		1,257,500
Interest expense		24,800
Net income before taxes		1,232,700
Income taxes (30%)		369,810
Net income	$	862,890

Account balances at the beginning of the year were: accounts receivable, $150,000; and inventory, $340,000. 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.)

1.Working capital

2.Current ratio

3.Acid-test ratio

4.Debt-to-equity ratio

5.Times interest earned ratio

6.Average collection period _____ days

7.Average sale period _____ days

8.Operating cycle _____ days