The following accounts were taken from the general ledger of Smithfield Corporation for 2017

Cash $25,000 Accounts payable $ 60,000

Accounts Receivable 50,000 Notes Payable 10,000

Notes Receivable 10,000 Salaries payable 5,000

Inventory 60,000 Bonds Payable (due in 10 years) 30,000

Prepaid Expenses 5,000 Retained Earnings 20,000

Office Equipment 20,000 Common Stock 20,000

Land 60,000

Based on the above information, compute the following (round to one decimal place):

1. Quick Assets _______________

2. Current Assets _______________

3. Quick Ratio _______________

4. Current Ratio _______________

5. Working Capital _______________

6. Debt Ratio _______________

2. Assume that Smithfield corporation decides to pay the Note Payable of $10,000. Recompute the current ratio and determine the amount of working capital after they pay off the note payable.

Current ratio ___________

Working Capital ___________

Problem 2

Discount Mart is a retail store with the following income statement for 2018 and 2017

	2018	%	2017	%
Net Sales	500,000		400,000
Cost of Goods Sold	320,000		250,000
Gross Profit	180,000		150,000
Operating Expenses	80,000		70,000
Operating Income	100,000		80,000
Interest and Taxes Expenses	30,000		30000
Net income	70,000		50,000

Required:

1. Compute the component percentages for each item in the income statements above (Round percentages to one decimal place (eg 13.3%)).

2. In the space below, comment on the changes in the major percentages (Gross Profit, Operating expenses, Net Income) from 2017 to 2018 as to whether they are favorable or unfavorable.

3. Return on Investment

The following items are taken from McMillian Corporation financial statements for the year 2017

Beginning End

Of year of year

Total Assets (000's) 3,434 4,524

Total Stockholders Equity (000's) 2,287 2,453

Operating Income 847

Net income 572

Required:

Compute (a) the return on assets (b) Return on equity for McMillian

1. Return on Assets ______________

2. Return on equity _______________

Assume that the average Return on assets for companies in McMillians industry is 18% and the average return on Equity is 20%. Comment on the profitability of McMillian compared to the industry average.