This problem uses the financial statements for the Genatron Manufacturing Corporation for the years 2012 and 2011 from Problem 6.

a. Calculate Genatrons dollar amount of net working capital in each year.

b.Calculate the current ration and the acid test ratio in each year.

c. Calculate the average collection period and the inventory turnover ratio in each year.

d. What changes in the management of genatrons current assets seem to have occurred between the two years?

financials from problem 6

Balance Sheet 2012 2011

Assets

Cash 40k 50k

Accts. Receivable 260k 200k

Inventory 500k 450k

Total current assets 800k 700k

Fixed Assets,net 400k 300k

Total Assets 1.2 million 1.0 million

LIABILITIES AND EQUITY

Accts.Payable 170k 130k

Bank Loan 90k 90k

Accruals 70k 50k

Total current liabilities 330k 270k

long term debt, 12% 400k 300k

Common stock, $10 par 300k 300k

Capital surplus 50k 50k

Retained earnings 120k 80k

Total liabilities & equity 1.2 million 1.0 million

Income Statement

Net sales 1.5 million 1.3 million

Cost of goods sold 900k 780k

Gross Profit 600k 520k

Expenses: general &admin 150k 150k

Marketing 150k 130k

Depreciation 53k 40k

Interest 57k 45k

Earnings before taxes 190k 155k

Income taxes 76k 62k

Net income 114k 93k