Just Dew It Corporation reports the following balance sheet information for 2017 and 2018. JUST DEW IT CORPORATION
2017 and 2018 Balance Sheets
Assets Liabilities and Owners' Equity
2017 2018 2017 2018
Current assets Current liabilities
Cash $10,150 $10,300 Accounts payable $70,250 $61,250
Accounts
receivable 27,700 28,950 Notes payable 47,250 46,750
Inventory 62,300 64,800 Total $117,500 $108,000
Total $100,150 $104,050 Long-term debt $59,900 $63,900
Owners' equity
Common stock and
paid-in surplus $89,000 $89,000
Fixed assets Retained earnings 158,750 185,150
Net plant and
equipment $325,000 $342,000 Total $247,750 $274,150
Total assets $425,150 $446,050 Total liabilities and
owners' equity $425,150 $446,050
1. Based on the balance sheets given for Just Dew It, calculate the following financial ratios for the year 2017.
A. Debt-equity ratio and equity multiplier.
B. Total debt ratio and long-term debt ratio.
2. Based on the balance sheets given for Just Dew It, calculate the following financial ratios for the year 2018.
A. Current ratio.
B. Quick ratio.
C. Cash ratio.
D. NWC to total assets ratio.
E. Debt-equity ratio and equity multiplier.
F. Total debt ratio and long-term debt ratio.

Just Dew It Corporation

2017 Ratios:

A 1. Debt-equity ratio = Total debt/Equity = 72%

A 2. Equity multiplier  = 58%

B. Total debt ratio = 42%

Long-term debt ratio = 14%

2. 2018 Ratios:

A. Current ratio = 96%

B. Quick ratio = 36%

C. Cash ratio = 9.5%

D. NWC to total assets ratio = -0.89%

E. Debt-equity ratio and equity multiplier:

Debt-equity ratio = 63%

Equity Multiplier = 61%

F. Total debt ratio and long-term debt ratio:

Total debt ratio = 38.5%

Long-term debt ratio = 14%

Explanation:

a) Data and Calculations:

JUST DEW IT CORPORATION

2017 and 2018 Balance Sheets

Assets Liabilities and Owners' Equity

2017 2018  

Current assets               2017         2018

Cash                             $10,150     $10,300

Accounts receivable     27,700       28,950

Inventory                      62,300       64,800

Total current assets $100,150   $104,050

Fixed assets

Net plant and

equipment            $325,000  $342,000  

Total assets            $425,150  $446,050

Current liabilities        2017         2018

Accounts payable   $70,250     $61,250

Notes payable           47,250       46,750

Total                       $117,500    $108,000

Long-term debt     $59,900     $63,900

Total liabilities      $177,400     $171,900

Owners' equity

Common stock and  

paid-in surplus     $89,000    $89,000

Retained earnings 158,750      185,150

Total                    $247,750   $274,150

Total liabilities and

owners' equity   $425,150  $446,050

2017 Ratios:

Debt-equity ratio = Total debt/Equity =  $177,400/$247,750 = 0.72 or 72%

Equity multiplier = Equity/Assets = $247,750/$425,150 = 58%

B. Total debt ratio = $177,400/$425,150 = 42%

Long-term debt ratio = $59,900/$425,150 = 14%

2. 2018 Ratios:

A. Current ratio = Current assets/current liabilities

= $104,050/$108,000 = 96%

B. Quick ratio = $(104,050-64,800)/$108,000 = 36%

C. Cash ratio = $10,300/$108,000 = 9.5%

D. NWC to total assets ratio = ($104,050-$108,000)/$446,050 = -0.89%

E. Debt-equity ratio and equity multiplier:

Debt-equity ratio = $171,900/$274,150 = 63%

Equity Multiplier = $274,150/$446,050 = 61%

F. Total debt ratio and long-term debt ratio:

Total debt ratio = $171,900/$446,050 = 38.5%

Long-term debt ratio = $63,900/$446,050 = 14%

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