Question

An extraction of financial data of two businesses, Best Digital and Very Zone Ltd are provided below.

	Best Digital	Very Zone
Net sales (all on credit)	$417 925	$493 845
Cost of sales	207 000	259 000
Interest expense		14 000
Profit	56 000	72 000

Selected balance sheet data at the end of the current year are:

		Best Digital		Very Zone
Current assets:
Cash		$ 23 000		$ 21 000
Short-term investments		38 000		15 000
Accounts receivables, net		37 000		47 000
Inventories		65 000		97 000
Prepaid expenses		22 000		18 000
Total current assets		185 000		198 000
Total assets		261 000		325 000
Total current liabilities		100 000		99 000
Total liabilities		100 000		131 000
Share capital		12 000		17 000
Total shareholders equity		$161 000		$194 000

Selected balance sheet data at the beginning of the current year are:

	Best Digital	Very Zone
Balance sheet:
Accounts receivables, net	$42 000	$49 000
Inventories	81 000	90 000
Total assets	258 000	275 000
Share capital	12 000	17 000

Requirements

Calculate the following ratios for both companies for the current year:

1. Current ratio
2. acid-test ratio
3. inventory turnover
4. days sales in receivables
5. debt ratio
6. Gross profit ratio

Response Template (with answers)

Requirement 1

		Best Digital			Very Zone
a.
b.
c.
d.
e.
f.