2 for the following questions.
Table 4-2
Drummond Company
Balance Sheet
Assets:
|
|
|
Cash and marketable securities
|
|
$400,000
|
Accounts receivable
|
|
1,415,000
|
Inventories
|
|
1,847,500
|
Prepaid expenses
|
|
24,000
|
Total current assets
|
|
3,686,500
|
Fixed assets
|
2,800,000
|
|
Less: accum. depr.
|
(1,087,500)
|
|
Net fixed assets
|
|
1,712,500
|
Total assets
|
|
$5,399,000
|
|
|
|
Liabilities:
|
|
|
Accounts payable
|
|
$600,000
|
Notes payable
|
875,000
|
Accrued taxes
|
|
92,000
|
Total current liabilities
|
|
$1,567,000
|
Long-term debt
|
|
900,000
|
Common Stock (100,000 shares)
|
|
700,000
|
Retained Earnings
|
|
2,232,000
|
Total liabilities and owner's equity
|
|
$5,399,000
|
|
|
|
Net sales (all credit)
|
|
$6,375,000
|
Less: Cost of goods sold
|
|
(4,375,000)
|
Selling and administrative expense
|
|
(1,000,000)
|
Depreciation expense
|
|
(135,000)
|
Interest expense
|
|
(100,000)
|
Earnings before taxes
|
|
$765,000
|
Income taxes
|
|
(306,000)
|
Net income
|
|
$459,000
|
1) Based on the information in Table 4-2, the current ratio is
- A) 2.97.
- B) 2.46.
- C) 2.35.
- D) 2.23.
2) Based on the information in Table 4-2, the acid-test ratio is
- A) 1.17.
- B) 1.33.
- C) 1.39.
- D) 2.15.
3) Based on the information in Table 4-2, the average collection period is
- A) 70 days.
- B) 81 days.
- C) 89 days.
- D) 127 days.
4) Based on the information in Table 4-2, the debt ratio is
- A) 28.12%.
- B) 34.74%.
- C) 45.69%.
- D) 42.03%.
5) Based on the information in Table 4-2, the return on equity is
- A) 19.33%.
- B) 18.47%.
- C) 16.66%.
- D) 15.65%.
6) Based on the information in Table 4-2, and assuming the company's stock price is $50 per share, the P/E ratio is
- A) 10.89.
- B) 14.33.
- C) 24.44.
- D) 27.50.
7) Based on the information in Table 4-2, the times interest earned ratio is
- A) 11.48.
- B) 5.25.
- C) 4.88.
- D) 8.65.
8) Based on the information in Table 4-2, the inventory turnover ratio is
- A) 1.29 times.
- B) 2.37 times.
- C) 4.43 times.
- D) 2.99 times.