1.

out of 120 points (100%)

award:

10 out of

10.00

points

Just Dew It Corporation reports the following balance sheet information for 2011 and 2012.

JUST DEW IT CORPORATION

2011 and 2012 Balance Sheets

Assets

2011

Current assets

Cash

Accounts receivable

Inventory

Total

Liabilities and Owners’ Equity

2011

2012

$ 11,000

27,000

75,000

$ 14,250

36,750

96,250

$ 113,000

$147,250

Current liabilities

Accounts payable

Notes payable

2012

$ 54,000

14,800

$ 63,750

20,500

$ 68,800

$ 84,250

Long-term debt

Owners’ equity

Common stock and paid-in surplus

Retained earnings

$ 50,000

$ 40,000

$ 55,000

226,200

$ 55,000

320,750

Total

Net plant and equipment

$287,000

$352,750

Total

$281,200

$375,750

Total assets

$400,000

$500,000

Total liabilities and owners’ equity

$400,000

$500,000

Based on the balance sheets given for Just Dew It:

a. Calculate the current ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))

Current ratio

2011

1.64

times

2012

1.75

times

b. Calculate the quick ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))

Quick ratio

2011

0.55

times

2012

0.61

times

c. Calculate the cash ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))

Cash ratio

2011

0.16

times

2012

0.17

times

d. Calculate the NWC to total assets ratio for each year. (Round your answers to 2 decimal places.

(e.g., 32.16))

NWC ratio

2011

11.00

%

2012

12.60

%

e. Calculate the debt–equity ratio and equity multiplier for each year. (Round your answers to 2 decimal places. (e.g., 32.16))

Debt-equity ratio

Equity multiplier

2011

0.42

1.42

times

2012

0.33

1.33

times

f. Calculate the total debt ratio and long-term debt ratio for each year. (Round your answers to 2 decimal places. (e.g., 32.16))

Total debt ratio

Long-term debt ratio

2011

0.30

times

0.15

times

2012

0.25

times

0.10

times

Learning Objective: 03-02 How to compute and, more importantly, interpret some common

ratios.