Reference no: EM132203918

Consider the following financial statement data:

Balance Sheet

Cash $ 20

Accounts receivable 20

Merchandise inventory 40

Plant, at carrying amount 140

$220

Accounts payable $ 20

Non-current borrowings 60

Common shares (8 shares issued) 80

Retained earnings 60

$220

Income Statement

Sales $100

Cost of goods sold 50

Gross profit 50

Operating expenses 14

Income from operations 36

Less: Interest 6

Income before income taxes 30

Less: Income taxes 10

Net income $ 20

Assume that the average of all balance sheet items is equal to the year-end figure and that all sales are on credit.

a. Calculate the following ratios:

i. Return on total assets (assume interest has been paid)

ii. Return on shareholders' equity

iii. Times interest earned ratio

iv. Earnings per share

v. Number of days of sales in inventory

vi. Accounts receivable collection period

vii. Sales to total assets ratio

viii. Current ratio

ix. Acid-test ratio

x. Debt to shareholders' equity ratio.

b. Which of these ratios are measures of liquidity?