Exercise 16-8 (Algo) Selected Financial Ratios [LO16-2, LO16-3, LO16-4]

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

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash	$	22,000
Accounts receivable, net		240,000
Merchandise inventory		340,000
Prepaid expenses		10,000
Total current assets		612,000
Property and equipment, net		810,000
Total assets	$	1,422,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	260,000
Bonds payable, 11%		350,000
Total liabilities		610,000
Stockholders equity:
Common stock, $5 par value	$	110,000
Retained earnings		702,000
Total stockholders equity		812,000
Total liabilities and stockholders equity	$	1,422,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	3,200,000
Cost of goods sold		1,067,500
Gross margin		2,132,500
Selling and administrative expenses		580,000
Net operating income		1,552,500
Interest expense		38,500
Net income before taxes		1,514,000
Income taxes (30%)		454,200
Net income	$	1,059,800

Account balances at the beginning of the year were: accounts receivable, $160,000; and inventory, $270,000. 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. (Use 365 days in a year. 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