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The financial statements for Castile Products, Inc., are given below:
| Castile Products, Inc. Balance Sheet December 31 |
| Assets | | |
| Current assets: | | |
| Cash | $ | 19,000 |
| Accounts receivable, net | | 200,000 |
| Merchandise inventory | | 390,000 |
| Prepaid expenses | | 7,000 |
| Total current assets | | 616,000 |
| Property and equipment, net | | 810,000 |
| Total assets | $ | 1,426,000 |
| Liabilities and Stockholders' Equity |
| Liabilities: | | |
| Current liabilities | $ | 280,000 |
| Bonds payable, 11% | | 340,000 |
| Total liabilities | | 620,000 |
| Stockholders equity: | | |
| Common stock, $5 par value | $ | 180,000 |
| Retained earnings | | 626,000 |
| Total stockholders equity | | 806,000 |
| Total liabilities and stockholders equity | $ | 1,426,000 |
| |
| Castile Products, Inc. Income Statement For the Year Ended December 31 |
| Sales | $ | 2,880,000 |
| Cost of goods sold | | 1,462,000 |
| Gross margin | | 1,418,000 |
| Selling and administrative expenses | | 660,000 |
| Net operating income | | 758,000 |
| Interest expense | | 37,400 |
| Net income before taxes | | 720,600 |
| Income taxes (30%) | | 216,180 |
| Net income | $ | 504,420 |
| |
Account balances at the beginning of the year were: accounts receivable, $160,000; 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.)
| 1 | working capital | | |
| 2 | current ratio | | |
| 3 | acid test ratio | | |
| 4 | debt-to-equity ratio | | |
| 5 | times interest earned ratio | | |
| 6 | average collection period | | days |
| 7 | average sale period | | days |
| 8 | operation cycle | | days |
Answer & Explanation
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