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

Castile Products, Inc. Balance Sheet December 31
Assets
Current assets:
Cash	$	21,000
Accounts receivable, net		250,000
Merchandise inventory		390,000
Prepaid expenses		10,000
Total current assets		671,000
Property and equipment, net		820,000
Total assets	$	1,491,000
Liabilities and Stockholders' Equity
Liabilities:
Current liabilities	$	270,000
Bonds payable, 12%		310,000
Total liabilities		580,000
Stockholders equity:
Common stock, $5 per value	$	190,000
Retained earnings		721,000
Total stockholders equity		911,000
Total liabilities and stockholders equity	$	1,491,000

Castile Products, Inc. Income Statement For the Year Ended December 31
Sales	$	3,800,000
Cost of goods sold		1,292,000
Gross margin		2,508,000
Selling and administrative expenses		640,000
Net operating income		1,868,000
Interest expense		37,200
Net income before taxes		1,830,800
Income taxes (30%)		549,240
Net income	$	1,281,560

Account balances at the beginning of the year were: accounts receivable, $150,000; and inventory, $290,000. 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. (Round your intermediate calculations and final answer to 1 decimal place.)

Answers:

1. Calculation of working capital: Current assets $ 671,000 Current liabilities 270,000 Working capital $ 401,000

2. Current ratio: Current ratio = Current assets = $671,000 = 2.5 Current liabilities $270,000

3. Acid-test ratio: Acid-test ratio = Cash + Marketable securities + Accounts receivable + Short-term notes receivable Current liabilities = $21,000 + $0 + $250,000 + 0 $270,000 = 1.00

4. Debt-to-equity ratio: = Total liabilities Stockholders' equity = $580,000 $911,000 = 0.64 (rounded)

5. Times interest earned: Times interest earned = Earnings before interest and income taxes Interest expense = $1,868,000 $37,200 = 50.22

6. Average collection period: Accounts receivable turnover = Sales on account Average accounts receivable = $3,800,000 ($250,000 + $150,000)/2 = 19 Average collection period = 365 days Accounts receivable turnover = 365 days 19 = 19.2 days (rounded)

7. Average sale period: Inventory turnover = Cost of goods sold Average inventory = $1,292,000 ($390,000 + $290,000)/2 = 3.8 Average sale period = 365 days 3.8 = 96.1 days (rounded)

8.

The operating cycle is computed as follows:

Operating cycle	= Average sales period + Average collection period
	= 96.1 days + 19.2 days = 115.3 days