Sanchez Company had the following year-end balances: Cash $325,000 Marketable Securities 175,000 Accounts Receivable, net 450,000 Inventory 225,000 Prepaid Expenses 110,000 Plant Assets, net 640,000 Accounts Payable 375,000 Long-term Notes Payable 365,000 Common Stock 645,000 Retained Earnings 540,000 Net income for the year was $305,000 a. Calculate the Current Ratio b. Calculate the Acid-Test Ratio c. Calculate the Debit to Equity Ratio d. Calculate the Debt Ratio
Sanchez Company had the following year-end balances:
Cash $325,000
Marketable Securities 175,000
Inventory 225,000
Prepaid Expenses 110,000
Plant Assets, net 640,000
Accounts Payable 375,000
Long-term Notes Payable 365,000
Common Stock 645,000
Net income for the year was $305,000
a. Calculate the
b. Calculate the Acid-Test Ratio
c. Calculate the Debit to Equity Ratio
d. Calculate the Debt Ratio
Current Ratio :— Current Ratio is the Ratio between Current Assets and Current Liabilities. The ratio indicator of the firms commitments to meets it's short term Liabilities.
Acid test Ratio :— This ratio is also termed as Liquidity ratio and Quick ratio. Acid test Ratio is the ratio between liquid assets or liquid Liabilities. Thus ratio indicator of Short term solvency of the Company.
Debt Equity Ratio :— Debt Equity Ratio is the Ratio between Total long term debt and Shareholders Fund. This ratio is the indicator of the Soundness of the long term Financial policies persued by the Business Enterprise.
Debt ratio :— The Debt ratio is the Ratio of Total Liabilities or Total Assets. Debt Ratio is a financial ratio that indicates the percentage of a company's assets that are provided via debt. It is the ratio of total debt and total assets.
Step by step
Solved in 5 steps
