Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take the bet!

Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identifying the amounts in those computations. Look for other measures that use those amounts.)

Liquidity and Solvency Measures	Computations
Ratio of fixed assets to long-term liabilities	[($714,000 + $740,000) 2] ($8,280,000 365)
Quick ratio	$3,091,000 $900,000
Accounts receivable turnover	[($714,000 + $740,000) 2] ($8,280,000 365)
Number of days' sales in receivables	$3,091,000 $900,000
Inventory turnover	[($1,072,000 + $1,100,000) 2] ($4,100,000 365)
Number of days' sales in inventory	$1,866,000 $900,000
Working capital	$2,690,000 $1,690,000
Ratio of liabilities to stockholders' equity	($989,400 + $127,000) $127,000
Times interest earned	$4,100,000 [($1,072,000 + $1,100,000) 2]
Current ratio	$2,590,000 $4,015,000

Points:

0 / 10