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

The financial statements for Castile Products, Incorporated, are given below:

Castile Products, Incorporated Balance Sheet December 31
Assets
Current assets:
Cash	$ 6,500
Accounts receivable, net	35,000
Merchandise inventory	70,000
Prepaid expenses	3,500
Total current assets	115,000
Property and equipment, net	185,000
Total assets	$ 300,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$ 50,000
Bonds payable, 10%	80,000
Total liabilities	130,000
Stockholders equity:
Common stock, $ 5 par value	30,000
Retained earnings	140,000
Total stockholders equity	170,000
Total liabilities and stockholders equity	$ 300,000

Castile Products, Incorporated Income Statement For the Year Ended December 31
Sales	$ 420,000
Cost of goods sold	292,500
Gross margin	127,500
Selling and administrative expenses	89,500
Net operating income	38,000
Interest expense	8,000
Net income before taxes	30,000
Income taxes (30%)	9,000
Net income	$ 21,000

Account balances at the beginning of the year were: accounts receivable, $25,000; and inventory, $60,000. 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 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.)