Case 3

The following selected information is taken from the financial statements of Arnn Company for its most recent year of operations:

Beginning balances:

Inventory $ 200,000

Accounts Receivable 300,000

Ending Balances:

Inventory $ 250,000

Accounts Receivable 400,000

Cash 100,000

Marketable securities (short-term) 200,000

Prepaid Expenses 50,000

Accounts Payable 175,000

Taxes Payable 85,000

Wages Payable 90,000

Short-term Loans Payable 50,000

During the year, Arnn had:

Net Sales $ 2,450,000

COGS 1,300,000

Example ratio calculation:

1. Compute the times interest earned ratio.

Interest Expense $ 1,500.00

Income Before Taxes $ 400,000.00

Calculation label: =Income Before Taxes+Interest Expense

Calculation: $ 401,500.00

Calculation label: =Interest Expense

Calculation: $ 1,500.00

Answer label: =(Income Before Taxes+Interest Expense)/Interest Expense

Answer: 267.67

Required:

Note: Round all answers to two decimal places and format as either a number or dollar amount. To receive full points, you must show your work and label the amounts used in your calculations.

Use an apostrophe ‘ at the beginning of a calculation label to keep it from showing a #NAME? error. This shows the text you have written (see my calculation label in the example above).

1. Compute the current ratio.

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2. Compute the Quick or Acid-Test Ratio:

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3. Compute the Accounts Receivable Turnover:

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4. Compute the Accounts Receivable Turnover in Days:

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5. Compute the Inventory Turnover:

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6. Compute Inventory Turnover in Days:

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