ACC 205 Week 5 Exercise 6 Ratio computation

6. Ratio computation.The financial statements of the Lone Pine Company follow.

LONE PINE COMPANY

Comparative Balance Sheets

December 31, 20X2 and 20X1 ($000 Omitted)

20X2 20X1

Assets

Current Assets

Cash and Short-Term Investments $400 $600

Accounts Receivable (net) 3,000 2,400

Inventories 3,000 2,300

Total Current Assets $6,400 $5,300

Property, Plant, and Equipment

Land $1,700 $500

Buildings and Equipment (net) 1,500 1,000

Total Property, Plant, and Equipment $3,200 $1,500

Total Assets $9,600 $6,800

Liabilities and Stockholders’ Equity

Current Liabilities

Accounts Payable $2,800 $1,700

Notes Payable 1,100 1,900

Total Current Liabilities $3,900 $3,600

Long-Term Liabilities

Bonds Payable 4,100 2,100

Total Liabilities $8,000 $5,700

Stockholders’ Equity

Common Stock $200 $200

Retained Earnings 1,400 900

Total Stockholders’ Equity $1,600 $1,100

Total Liabilities and Stockholders’ $9,600 $6,800

Equity

LONE PINE COMPANY

Statement of Income and Retained Earnings

For the Year Ending December 31,20X2 ($000 Omitted)

Net Sales* $36,000

Less: Cost of Goods Sold $20,000

Selling Expense 6,000

Administrative Expense 4,000

Interest Expense 400

Income Tax Expense 2,000 32,400

Net Income $3,600

Retained Earnings, Jan. 1 900

Ending Retained Earnings $4,500

Cash Dividends Declared and Paid 3,100

Retained Earnings, Dec. 31 $1,400

*All sales are on account.

Instructions

Compute the following items for Lone Pine Company for 20X2, rounding all calculations to two decimal

places when necessary:

a. Quick ratio

b. Current ratio

c. Inventory-turnover ratio

d. Accounts-receivable-turnover ratio

e. Return-on-assets ratio

f. Net-profit-margin ratio

g. Return-on-common-stockholders’ equity

h. Debt-to-total assets

i. Number of times that interest is earned