Respuesta :
Answer:
1. Current Asset Ratio = 1.86 : 1
2. Acid Test Ratio= 1.86 : 1
3. Debt to Equity ratio = 0.36 : 1
4. Times interest earned = 10.8
Explanation:
1. Current Asset Ratio = Current Asset
Current Liabilities
= $370,000 + $370,000 + $320,000
$570,000
= $1,060,000
$570,000
= 1.86
Current asset includes cash, short term investment and account receivable.
2. Acid Test Ratio = Current Asset - Inventory
Current Liabilities
= $1,060,000 - $0
$570,000
= 1.86
No inventory value is given, so the value is deemed zero.
3. Debt to Equity = Total liabilities
Shareholder`s equity
= $570,000+ $520,000
$1,600,000 + $1,410,000
= $1,090,000
$3,010,000
Both current and long term liabilities are taken as debt since the question does not provide information in regard of specific composition of current liabilities.
= 0.36
4. Times interest earned = Income before Interest and Tax
Interest payable
= $330,000+ $50,000 + $160,000
$50,000
= 10.8
