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(2)
PROBLEM 14.5B
SWEET AS SUGAR, INC. (concluded)
Long-term creditors should feel relatively secure. Not only is the company highly liquid,
45 Minutes, Strong
b.
(
1
)
Current ratio:
Current assets:
Cash 35,000$
Accounts receivabl
e
175,000
Inventor
y
225,000
Total current assets 435,000$
Current liabilities 190,000$
Current ratio
(
$435,000 ÷ $190,000
)
2.3 to 1
(
2
)
Quick ratio:
Quick ratio
(
$210,000 ÷ $190,000
)
1.1 to 1
(
3
)
Workin
g
ca
p
ital:
Current assets
[(p
art b
(
1
)]
435,000$
Less: Current liabilities 190,000
Debt ratio
(
$800,000 ÷ $1,300,000
)
61.5
%
d.
(
1
)
Return on assets:
O
p
eratin
g
income:
Return on assets
(
$105,000 ÷ $1,300,000
)
8.1
%
PROBLEM 14.6B
HAMILTON STORES
Parts a, c, e, and f appear on the following page.
a.
PROBLEM 14.6B
HAMILTON STORES (concluded)
In the statement of cash flows, amounts are reported on a cash basis, whereas in the income
statement, they are reported under the accrual basis. Apparently $8,000 of the interest
25 Minutes, Medium
(Dollar Amounts
in Thousands)
a. Current ratio:
(
1
)
Be
g
innin
g
of
y
ear
(
$43,000 ÷ $54,000
)
0.80 to 1
(
2
)
End of
y
ear
(
$82,000 ÷ $75,000
)
1.09 to 1
PROBLEM 14.7B
ROCHESTER CORPORATION
25 Minutes, Medium
a. (1) Inventory turnover:
(6) Return on average assets:
PROBLEM 14.8B
SOLAR SYSTEMS, INC.
b. Obtaining the loan will be desirable to stockholders because the return on average assets
PROBLEM 14.8B
SOLAR SYSTEMS, INC. (concluded)
35 Minutes, Medium
a.
THIS THA
T
STA
R
STA
R
(
1
)
Workin
g
ca
p
ital:
(
$95,000 + $100,000 + $50,000 - $120,000
)
125,000
$
(
$47,000 + $90,000 + $160,000 - $110,000
)
187,000
$
(
2
)
Current ratio:
(
$95,000 + $100,000 + $50,000
)
÷ $120,00
0
2.04 to 1
(
$47,000 + $90,000 + $160,000
)
÷ $110,000 2.70 to 1
(
3
)
Quick ratio:
(
$95,000 + $100,000
)
÷ $120,00
0
1.63 to 1
(
$47,000 + $90,000
)
÷ $110,000 1.25 to 1
(
4
)
Number of times inventor
y
turned over durin
g
the
y
ear
:
(
$700,000 cost of
g
oods sold ÷ $50,000 inventor
y)
14 times
(
$640,000 cost of
g
oods sold ÷ $160,000 inventor
y)
4 times
Avera
g
e number of da
y
s re
q
uired to turn over inventor
y:
(
365 ÷ 14 times
)
26 day
s
(
365 ÷ 4 times
)
91 day
s
(
5
)
Number of times accounts receivable turned over
:
(
$900,000 credit sales ÷ $100,000 accounts receivable
)
9 times
(
$840,000 credit sales ÷ $90,000 accounts receivable
)
9.33 times
PROBLEM 14.9B
THIS STAR, INC. AND
THAT
S
TAR, IN
C
.
