Asked by Bradley Fabretti on Jul 05, 2024
Verified
The following ratios have been computed for Mason Company for 2017. Profit margin 12.5% Times interest earned 8 times Receivables turnover 4 times Acid-test ratio 2:1 Current ratio 3:1 Debt to assets ratio 20%\begin{array} { l r } \text { Profit margin } & 12.5 \% \\\text { Times interest earned } & 8 \text { times } \\\text { Receivables turnover } & 4 \text { times } \\\text { Acid-test ratio } & 2 : 1 \\\text { Current ratio } & 3 : 1 \\\text { Debt to assets ratio } & 20 \%\end{array} Profit margin Times interest earned Receivables turnover Acid-test ratio Current ratio Debt to assets ratio 12.5%8 times 4 times 2:13:120% Mason Company's 2017 financial statements with missing information follow:
Instructions
Use the above ratios and information from the Mason Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.
Acid-test Ratio
A financial metric that measures a company's ability to pay its current liabilities without relying on the sale of inventory.
Debt to Assets Ratio
A financial metric indicating the proportion of a company's assets financed through debt, used to assess financial leverage.
Profit Margin
A financial metric used to evaluate the profitability of a business, calculated by dividing net income by sales.
- Engage in computing and decoding different financial ratios, highlighting liquidity, solvency, and profitability calculations.
- Evaluate and distinguish the financial achievements annually over multiple years.
Verified Answer
Let X=X =X= Total debt
X$350,000=20%X=$70,000$70,000−($10,000+$40,000)=$20,000\begin{array} { l } \frac { X } { \$ 350,000 } = 20 \% \\\\X = \$ 70,000 \\\$ 70,000 - ( \$ 10,000 + \$ 40,000 ) = \$ 20,000\end{array}$350,000X=20%X=$70,000$70,000−($10,000+$40,000)=$20,000 (11) Total liabilities and stockholders' equity = $350000; same as total assets-see (9) above.
Learning Objectives
- Engage in computing and decoding different financial ratios, highlighting liquidity, solvency, and profitability calculations.
- Evaluate and distinguish the financial achievements annually over multiple years.
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