(Ratio Computations and Analysis) Vogue Company’s condensed financial statements provide the following information.
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VOGUE COMPANY |
||
|
Dec. 31, 2012 |
Dec. 31, 2011 |
|
|
Cash |
$ 52,000 |
$ 60,000 |
|
Accounts receivable (net) |
158,000 |
80,000 |
|
Short term investments |
80,000 |
40,000 |
|
Inventory |
440,000 |
360,000 |
|
Prepaid expenses |
3,000 |
7,000 |
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Total current assets |
733,000 |
547,000 |
|
Property, plant, and equipment (net) |
897,000 |
853,000 |
|
Total assets |
$1,630,000 |
$1,400,000 |
|
Current liabilities |
240,000 |
160,000 |
|
Bonds payable |
400,000 |
400,000 |
|
Common stockholders’ equity |
990,000 |
840,000 |
|
Total liabilities and stockholders’ equity |
$1,630,000 |
$1,400,000 |
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INCOME STATEMENT |
|
|
Sales |
$1,640,000 |
|
Cost of goods sold |
(800,000) |
|
Gross profi t |
840,000 |
|
Selling and administrative expenses |
(480,000) |
|
Interest expense |
(40,000) |
|
Net income |
$ 320,000 |
Instructions
(a) Determine the following for 2012.
(1) Current ratio at December 31.
(2) Acid test ratio at December 31.
(3) Accounts receivable turnover.
(4) Inventory turnover.
(5) Rate of return on assets.
(6) Profit margin on sales.
(b) Prepare a brief evaluation of the financial condition of Vogue Company and of the adequacy of its profits.