University:
Grand Rapids Community College
Course:
Financial and Managerial Accounting: Information for Decisions - John J. Wild
Academic year:

2024
Views:

484

Pages:

2
Author:

stud_ice13

Question 1: Sales Trend Percent Calculation • • Given: o Prior year sales = $300,000 (base period) o Current year sales = $351,000 (analysis period) Formula: Trend Percent=(Analysis Period AmountBase Period Amount)×100 Trend Percent=(351,000300,000)×100=117% • Answer: d. 117% Question 2: Current Ratio Calculation • • Given: o Current assets = $86,000 + $76,000 + $122,000 + $12,000 = $296,000 o Current liabilities = $124,000 Formula: Current Ratio=Current AssetsCurrent Liabilities Current Ratio=Current Liabilities/Current Assets Current Ratio=296,000124,000=2.39 • Answer: e. 2.39 Question 3: Acid-Test Ratio Calculation • • Given: o Quick assets (cash, accounts receivable, and short-term investments) = $86,000 + $76,000 = $162,000 o Current liabilities = $124,000 Formula: Acid-Test Ratio=Quick AssetsCurrent Liabilities Test Ratio=162,000124,000=1.31 • Answer: c. 1.31 Question 4: Debt Ratio Calculation • • Given: o Total liabilities = $124,000 + $90,000 = $214,000 o Total assets = $830,000 Formula: Debt Ratio=(Total LiabilitiesTotal Assets)×100 Debt Ratio=(214,000830,000)×100=25.78% • Answer: a. 25.78% Question 5: Equity Ratio Calculation • • Given: o Total equity = $300,000 + $316,000 = $616,000 o Total assets = $830,000 Formula: Equity Ratio=(Total EquityTotal Assets)×100 Equity Ratio=(616,000830,000)×100=74.22% • Answer: d. 74.22% Summary of Answers 1. 2. 3. 4. 5. d. 117% (Sales trend percent calculation) e. 2.39 (Current ratio) c. 1.31 (Acid-test ratio) a. 25.78% (Debt ratio) d. 74.22% (Equity ratio) These calculations provide a snapshot of liquidity, solvency, and the overall financial health of the company. Ratio analysis is a fundamental tool for comparing current performance to prior periods and understanding a company’s ability to manage its obligations and generate returns.