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Week Five Exercise Assignment (Financial Ratios)

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Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:EdisonCashShort-term investmentsAccounts receivableInventoryPrepaid expensesAccounts payableNotes payable: short-termAccrued payablesLong-term liabilities$6,0003,0002,0001,0008002003,1003003,800Stagg$5,0002,5002,5002,5008002003,1003003,800$4,0002,0003,0004,0008002003,1003003,8001. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the mostAnswerCurrent ratio = Current assets / Current Liabilities3.562.3.69Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:20X5Net credit salesCost of goods sold20X4$832,000$760,000530,000400,000Cash, Dec. 31125,000110,000Average Accounts receivable205,000156,000Average InventoryAccounts payable, Dec. 3170,00050,000115,000108,000Instructionsa. Compute the accounts receivable and inventory turnover ratios for 20X5. Alaska rounds all calculations to two decimal places.Accounts Receivable Turnover = Net Credit Sales / Average account receivable4.06Inventory Turnover = COGS / Average Inventory7.573. Profitability ratios, tradingon the equity. Digital Relay has both preferred and common stock outstanding. The com-pany reported the following informNet salesInterest expenseIncome tax expensePreferred dividend ...
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