E13-17B (Ratio Computations and Discussion) Singleton Company has been operating for several years, and on December 31, 2014, presented the following balance sheet. SINGLETON COMPANY BALANCE SHEET DECEMBER 31, 2014 Cash $ 20,000 Accounts payable $ 40,000

E13-17B (Ratio Computations and Discussion) Singleton Company has been operating for several years, and on December 31, 2014, presented the following balance sheet.

                                              SINGLETON COMPANY

                                                  BALANCE SHEET

                                                 DECEMBER 31, 2014                                          

Cash                      $ 20,000        Accounts payable       $ 40,000

Receivables              37,500       Mortgage payable           70,000

Inventories                47,500       Common stock ($1 par)  75,000

Plant assets (net)   110,000       Retained earnings           30,000

                             $215,000                                            $215,000

The net income for 2014 was $12,500. Assume that total assets are the same in 2013 and 2014.

Instructions

Compute each of the following ratios. For each of the four, indicate the manner in which it is computed and its significance as a tool in the analysis of the financial soundness of the company.

(a) Current ratio.    (c) Debt to total assets.

(b) Acid-test ratio. (d) Rate of return on assets.