NUMBER THREE:

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

180,000

Merchandise inventory

380,000

Prepaid expenses

7,000

Total current assets

589,000

Property and equipment, net

820,000

Total assets

$

1,409,000

Liabilities and Stockholders' Equity

Liabilities:

Current liabilities

$

220,000

Bonds payable, 10%

380,000

Total liabilities

600,000

Stockholders' equity:

Common stock, $5 par value

$

150,000

Retained earnings

659,000

Total stockholders' equity

809,000

Total liabilities and stockholders' equity

$

1,409,000

Castile Products, Inc.

Income Statement

For the Year Ended December 31

Sales

$

3,700,000

Cost of goods sold

1,276,500

Gross margin

2,423,500

Selling and administrative expenses

610,000

Net operating income

1,813,500

Interest expense

38,000

Net income before taxes

1,775,500

Income taxes (30%)

532,650

Net income

$

1,242,850

Account balances at the beginning of the year were: accounts receivable, $190,000; and inventory, $310,000. All sales were on account.

Required:

Compute the following financial data and ratios:

1. Working capital.

2. Current ratio.

3. Acid-test ratio.

4. Debt-to-equity ratio.

5. Times interest earned ratio.

6. Average collection period.

7. Average sale period.

8. Operating cycle.