| Case 3 |
| The following selected information is taken from the financial statements of Arnn Company for its most recent year of operations: |
| Beginning balances: |
| Inventory | $ 200,000 |
| Accounts Receivable | 300,000 |
| Ending Balances: |
| Inventory | $ 250,000 |
| Accounts Receivable | 400,000 |
| Cash | 100,000 |
| Marketable securities (short-term) | 200,000 |
| Prepaid Expenses | 50,000 |
| Accounts Payable | 175,000 |
| Taxes Payable | 85,000 |
| Wages Payable | 90,000 |
| Short-term Loans Payable | 50,000 |
| During the year, Arnn had: |
| Net Sales | $ 2,450,000 |
| COGS | 1,300,000 |
| Example ratio calculation: |
| 1. Compute the times interest earned ratio. |
| Interest Expense | $ 1,500.00 |
| Income Before Taxes | $ 400,000.00 |
| Calculation label: | =Income Before Taxes+Interest Expense |
| Calculation: | $ 401,500.00 |
| Calculation label: | =Interest Expense |
| Calculation: | $ 1,500.00 |
| Answer label: | =(Income Before Taxes+Interest Expense)/Interest Expense |
| Answer: | 267.67 |
| Required: |
| Note: Round all answers to two decimal places and format as either a number or dollar amount. To receive full points, you must show your work and label the amounts used in your calculations. |
| Use an apostrophe ' at the beginning of a calculation label to keep it from showing a #NAME? error. This shows the text you have written (see my calculation label in the example above). |
| 1. Compute the current ratio. |
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| 2. Compute the Quick or Acid-Test Ratio: |
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| 3. Compute the Accounts Receivable Turnover: |
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| 4. Compute the Accounts Receivable Turnover in Days: |
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| 5. Compute the Inventory Turnover: |
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| 6. Compute Inventory Turnover in Days: |
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