Working Capital and ShortâTerm LiquidityRatios
Bell Company has a current ratio of 3.00 (3.00:1) on December 31.On that date the companyâs current assets are as follows:
Cash $29,000 Short-term investments 49,400 Accounts receivable (net) 170,000 Inventory 200,000 Prepaid expenses 11,600 Current assets $460,000
Bell Companyâs current liabilities at the beginning of the yearwere $140,000 and during the year its operating activities provideda cash flow of $60,000.
a. What are the firmâs current liabilities on December 31?
b. What is the firmâs working capital on December 31?
c. What is the quick ratio on December 31? Round to 2 decimalpoints.
d. What is the Bellâs operating-cash-flow-to-current-liabilitiesratio? Round to 2 decimal points.
Working Capital and ShortâTerm LiquidityRatios
Bell Company has a current ratio of 3.00 (3.00:1) on December 31.On that date the companyâs current assets are as follows:
| Cash | $29,000 |
| Short-term investments | 49,400 |
| Accounts receivable (net) | 170,000 |
| Inventory | 200,000 |
| Prepaid expenses | 11,600 |
| Current assets | $460,000 |
Bell Companyâs current liabilities at the beginning of the yearwere $140,000 and during the year its operating activities provideda cash flow of $60,000.
a. What are the firmâs current liabilities on December 31?
b. What is the firmâs working capital on December 31?
c. What is the quick ratio on December 31? Round to 2 decimalpoints.
d. What is the Bellâs operating-cash-flow-to-current-liabilitiesratio? Round to 2 decimal points.
Related questions
Accounts Receivable and Inventory Ratios
Bell Company, whose current assets at December 31 are shownbelow, had net sales for the year of $900,000 and cost of goodssold of $550,000. At the beginning of the year, Bellâs accountsreceivable (net) were $160,000 and its inventory was $195,000.
| Cash | $29,000 |
| Short-term investments | 49,400 |
| Accounts receivable (net) | 170,000 |
| Inventory | 200,000 |
| Prepaid expenses | 11,600 |
| Current assets | $460,000 |
Round the turnover calculations to two decimal points. Use 365 daysin a year and round days calculations to the nearest day (wholenumber).
a. What is the companyâs accounts receivable turnover for theyear?
b. What is the companyâs average collection period for theyear?
days
c. What is the companyâs inventory turnover for the year?
d. What is the companyâs daysâ sales in inventory for theyear?
days
Presented here are the comparative balance sheets of Hames,Inc., at December 31, 2017 and 2016. Sales for the year endedDecember 31, 2017, totaled $640,000.
| HAMES, INC., Balance Sheets December 31, 2017 and 2016 | ||||||||||
| 2017 | 2016 | |||||||||
| Assets | ||||||||||
| Cash | $ | 19,000 | $ | 20,000 | ||||||
| Accounts receivable | 78,000 | 72,000 | ||||||||
| Merchandise inventory | 103,000 | 99,000 | ||||||||
| Total current assets | $ | 200,000 | $ | 191,000 | ||||||
| Land | 50,000 | 40,000 | ||||||||
| Plant and equipment | 125,000 | 110,000 | ||||||||
| Less: Accumulateddepreciation | (65,000 | ) | (60,000 | ) | ||||||
| Total assets | $ | 310,000 | $ | 281,000 | ||||||
| Liabilities | ||||||||||
| Short-term debt | $ | 18,000 | $ | 17,000 | ||||||
| Accounts payable | 64,000 | 75,500 | ||||||||
| Other accrued liabilities | 20,000 | 18,000 | ||||||||
| Total current liabilities | $ | 102,000 | $ | 110,500 | ||||||
| Long-term debt | 22,000 | 30,000 | ||||||||
| Total liabilities | $ | 124,000 | $ | 140,500 | ||||||
| StockholdersâEquity | ||||||||||
| Common stock, no par, 100,000shares authorized 40,000 and 25,000 shares issued, respectively | $ | 74,000 | $ | 59,000 | ||||||
| Retained earnings: | ||||||||||
| Beginning balance | $ | 81,500 | $ | 85,000 | ||||||
| Net income for the year | 50,500 | 1,500 | ||||||||
| Dividends for the year | (20,000 | ) | (5,000 | ) | ||||||
| Ending balance | $ | 112,000 | $ | 81,500 | ||||||
| Total stockholdersâ equity | $ | 186,000 | $ | 140,500 | ||||||
| Total liabilities andstockholdersâ equity | $ | 310,000 | $ | 281,000 | ||||||
a. Calculate ROI for 2017. (Do notround intermediate calculations. Round your final answer to 2decimal places.)
b. Calculate ROE for 2017. (Round youranswer to 1 decimal place.)
c. Calculate working capital at December 31,2017.
d. Calculate the current ratio at December 31,2017. (Round your answer to 2 decimal places.)
e. Calculate the acid-test ratio at December31, 2017. (Round your answer to 2 decimalplaces.)
f. Assume that on December 31, 2017, thetreasurer of Hames, Inc., decided to pay $15,000 of accountspayable. What impact, if any, this receipt will have on the answersyou calculated for requirements a-d (increase,decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c.Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
g. Assume that instead of paying $15,000 ofaccounts payable on December 31, 2017. Hames, Inc., collected$15,000 of accounts receivable. What impact, if any, this receiptwill have on the answers you calculated for requirementsa-d (increase, decrease, or no effect)
a. ROI for the year ended December 31, 2017:
b. ROE for the year ended December 31, 2017:
c. Working capital as at December 31, 2017:
d. Current ratio as at December 31, 2017:
