Liquidity Ratios

Mike Sanders is considering the purchase of Kepler Company, a firm specializing in the manufacture of office supplies. To be able to assess the financial capabilities of the company, Mike has been given the company's financial statements for the 2 most recent years.

Kepler Company Comparative Balance SheetsLine Item DescriptionThis YearLast YearAssetsCurrent assets:Cash$ 50,000$100,000Accounts receivable, net300,000150,000Inventory600,000400,000Prepaid expenses25,00030,000Total current assets$ 975,000$680,000Property and equipment, net125,000150,000Total assets$1,100,000$830,000Liabilities and Stockholders' EquityCurrent liabilities:Accounts payable$ 400,000$290,000Short-term notes payable200,00060,000Total current liabilities$ 600,000$350,000Long-term bonds payable, 12%100,000150,000Total liabilities$ 700,000$500,000Stockholders' equity:Common stock (100,000 shares)200,000200,000Retained earnings200,000130,000Total liabilities and stockholders' equity$1,100,000$830,000

Kepler Company Comparative Income StatementsLine Item DescriptionThis YearLast YearSales$ 950,000$ 900,000Less: Cost of goods sold500,000490,000Gross margin$ 450,000$ 410,000Less: Selling and administrative expenses275,000260,000Operating income$ 175,000$ 150,000Less: Interest expense12,00018,000Income before taxes$ 163,000$ 132,000Less: Income taxes65,20052,800Net income$ 97,800$ 79,200Less: Dividends (common)27,80019,200Net income, retained$ 70,000$ 60,000

When required, round your intermediate computations and answers to two decimal places. Assume that the ending balance of last year's accounts receivable and inventory is the average for last year computations. Assume 365 days per year.

Required:

1. Compute the following ratios for each year:

Line Item DescriptionThis YearLast Yeara. Current ratiofill in the blankfill in the blankb. Quick ratiofill in the blankfill in the blankc. Receivables turnoverfill in the blank daysfill in the blank daysd. Inventory turnoverfill in the blank daysfill in the blank days