Use the information in the table below to calculate the following ratios for Windswept Woodworks for year 1 and year 2. Windswept Woodworks, Incorporated Input Data (millions of dollars) Year 2 Year 1 Accounts payable 602 534 Accounts receivable 1,446 980 Accumulated depreciation 6,912 6,782 Cash & equivalents 390 278 Common stock 1,350 1,270 Cost of goods sold 1,570 n.a. Depreciation expense ? n.a. Common stock dividends paid ? n.a. Interest expense 210 n.a. Inventory 1,180 1,176 Addition to retained earnings 602 n.a. Long-term debt 978 886 Notes payable 300 450 Gross plant & equipment 10,540 10,280 Retained earnings 3,228 2,626 Sales 3,088 n.a. Other current liabilities 186 166 Tax rate 21% n.a. Market price per share – year end $ 25.80 $ 23.50 Number of shares outstanding 500 million 500 million (For all requirements, round your answers to 2 decimal places.) Required: a. Interest coverage ratio (Assume that year 1 EBIT was 1,307 and year 1 interest expense was 180.) Year 2 interest coverage ratio Year 1 interest coverage ratio b. Average collection period (Assume that the accounts receivable balance was 1,020 on December 31 of the previous year and that year 1 sales were 2,788.) (Use 365 days in a year.) Year 2 ACP days Year 1 ACP days c. Current ratio Year 2 current ratio Year 1 current ratio d. Quick ratio Year 2 quick ratio Year 1 quick ratio

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

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Use the information in the table below to calculate the following ratios for Windswept Woodworks for year 1 and year 2.

	Year 2	Year 1
Windswept Woodworks, Incorporated
Input Data
(millions of dollars)
Accounts payable	602		534
Accounts receivable	1,446		980
Accumulated depreciation	6,912		6,782
Cash & equivalents	390		278
Common stock	1,350		1,270
Cost of goods sold	1,570		n.a.
Depreciation expense	?		n.a.
Common stock dividends paid	?		n.a.
Interest expense	210		n.a.
Inventory	1,180		1,176
Addition to retained earnings	602		n.a.
Long-term debt	978		886
Notes payable	300		450
Gross plant & equipment	10,540		10,280
Retained earnings	3,228		2,626
Sales	3,088		n.a.
Other current liabilities	186		166
Tax rate	21%		n.a.
Market price per share – year end	$ 25.80		$ 23.50
Number of shares outstanding	500	million	500	million

(For all requirements, round your answers to 2 decimal places.)

Required:

a. Interest coverage ratio (Assume that year 1 EBIT was 1,307 and year 1 interest expense was 180.)

Year 2 interest coverage ratio
Year 1 interest coverage ratio

b. Average collection period (Assume that the accounts receivable balance was 1,020 on December 31 of the previous year and that year 1 sales were 2,788.) (Use 365 days in a year.)