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Following data are taken from the financial statements of H. Hogan Company. The average number of shares of common outstanding for the year was 10,000. The following data are in aphabetical order:
Accounts payable $25,000
Accounts receivable $76,000
Cash $34,000
Gross profit $185,000
Net income $60,000
Net sales $400,000
Other current liabilities $15,000
Salaries payable $4,000
Stockholders’ equity $114,000
Total assets $285,000
Compute the following:
a. Current ratio
b. Debt to total assets ratio
c. Earnings per share
d. Working capital
Expert Answer
a. Current Assets = $76,000 + $34,000 = $110,000
Current Liabilities = $25,000 + $15,000 + $4,000 = $44,000
Current Ratio = Current assets ÷ Current liabilities = $110,000 ÷ $44,000 = 2.5 : 1
b. Total debt = Total assets – Stockholders’ equity = $285,000 – $114,000
Debt to total assets Ratio = Total debt ÷ Total assets = $171,000 ÷ $285,000 = 60%
c. Earnings per share = Net income – Preferred stock dividends ÷ Average number of common shares outstanding = $60,000 ÷ 10,000 = $6.00 per share
d. Working capital = Currents assets – Current liabilities = $110,000 – $44,000 = $66,000
