According to the scenario, the formula alongside with the given data is as follows:-
Current Ratio = Current Assets ÷ Current Liabilities
where,
Current assets for the year is
= Cash + Account Receivable(Net) + Inventory
= $4,500 + $20,800 + $10,100
= $35,400
The current liabilities total $ 12,700
Thus, the current ratio can be calculated as
= $35,400 ÷ $12,700
= 2.79 times
Acid Test Ratio (2017) = (Accounts Receivable + Cash) ÷ (Current Liabilities)
= ($20,800+$4,500) ÷ ($12,700)
= $25,300 ÷ $12,700
= 1.99 times
The Accounts Receivable Turnover can be determined as
= Sales ÷ (Opening Receivable + Closing Receivable ÷ 2)
= $110,000 ÷ ($23,300 + $20,800 ÷ 2)
= $110,000 ÷ $22,050
= 4.99 Times
The Inventory Turnover Times is
= Cost of Goods Sold ÷ (Opening Inventory + Closing Inventory ÷ 2)
= $60,800 ÷ ($7,200 + $10,100 ÷ 2)
= $60,800 ÷ $8,650
= 7.03 Times
Profit Margin is
= Profit ÷ Sales × 100
= $15,000 ÷ $110,000 × 100
= 13.64%
Assets Turnover is
= Sales ÷ (Opening Assets + Closing Assets ÷ 2)
= $110,000 ÷ ($119,500 + $110,300 ÷ 2)
= $110,000 ÷ $114,900
= 0.96 Times
Return on Assets is
= Profit ÷ (Opening Assets + Closing Assets ÷ 2)
= $15,000 ÷ ($119,500 + $110,300 ÷ 2)
= $15,000 ÷ $114,900
= 13.05%
Equity is defined as
Common Stock + Retained Earnings
Opening Equity amounts to
= $68,600 + $19,800
= $88,400
Closing Equity stands at
= $74,900 + $22,700
= $97,600
Return on Common Stock Holder’s Equity can be calculated by
= Profit ÷ (Opening Equity + Closing Equity ÷ 2)
= $15,000 ÷ ($88,400 + $97,600 ÷ 2)
=$15,000 ÷ $93,000
= 16.13%
The Debt to Asset Ratio is
= Borrowing ÷ Assets
= 0 ÷ $110,300
= 0
Through the calculation of these ratios, one can assess the organization’s financial health, liquidity, performance, and overall financial standing. These ratios accurately depict the status of the company.
