Posted: March 4th, 2014
The financial statements of the Lone Pine Company follow.
| 6. Ratio computation. | ||||||
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LONE PINE COMPANY |
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Comparative Balance Sheets |
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December 31, 20X2 and 20X1 ($000 Omitted) |
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20X2 |
20X1 |
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| Assets | ||||||
| Current Assets | ||||||
| Cash and Short-Term Investments | $400 | $600 | ||||
| Accounts Receivable (net) | 3,000 | 2,400 | ||||
| Inventories | 3,000 | 2,300 | ||||
| Total Current Assets | $6,400 | $5,300 | ||||
| Property, Plant, and Equipment | ||||||
| Land | $1,700 | $500 | ||||
| Buildings and Equipment (net) | 1,500 | 1,000 | ||||
| Total Property, Plant, and Equipment | $3,200 | $1,500 | ||||
| Total Assets | $9,600 | $6,800 | ||||
| Liabilities and Stockholders’ Equity | ||||||
| Current Liabilities | ||||||
| Accounts Payable | $2,800 | $1,700 | ||||
| Notes Payable | 1,100 | 1,900 | ||||
| Total Current Liabilities | $3,900 | $3,600 | ||||
| Long-Term Liabilities | ||||||
| Bonds Payable | 4,100 | 2,100 | ||||
| Total Liabilities | $8,000 | $5,700 | ||||
| Stockholders’ Equity | ||||||
| Common Stock | $200 | $200 | ||||
| Retained Earnings | 1,400 | 900 | ||||
| Total Stockholders’ Equity | $1,600 | $1,100 | ||||
|    Total Liabilities and Stockholders’ Equity | $9,600 | $6,800 | ||||
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LONE PINE COMPANY |
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Statement of Income and Retained Earnings |
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For the Year Ending December 31,20X2 ($000 Omitted) |
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| Net Sales* |
$36,000 |
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| Less: Cost of Goods Sold | $20,000 | |||||
| Selling Expense | 6,000 | |||||
| Administrative Expense | 4,000 | |||||
| Interest Expense | 400 | |||||
| Income Tax Expense |
2,000 |
32,400 | ||||
| Net Income | $3,600 | |||||
| Retained Earnings, Jan. 1 | Â Â Â Â Â 900 | |||||
| Ending Retained Earnings | $4,500 | |||||
| Cash Dividends Declared and Paid | Â Â 3,100 | |||||
| Retained Earnings, Dec. 31 | $1,400 | |||||
| *All sales are on account. | ||||||
Instructions
Compute the following items for Lone Pine Company for 20X2, rounding all calcuÂlations to two decimal places when necessary:
a. Quick ratio
b. Current ratio
c. Inventory-turnover ratio
d. Accounts-receivable-turnover ratio
e. Return-on-assets ratio
f. Net-profit-margin ratio
g. Return-on-common-stockholders’ equity
h. Debt-to-total assets
i. Number of times that interest is earned
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