Z Corp.
Balance Sheet
12/31
2000 2001
Cash $ 100 $120
Accounts receivable 250 260
Inventory 400 500
Equipment (net) 550 620
Total assets 1300 1500
Accounts payable 300 350
Mortgage payable 500 500
Capital stock (100 Shares) 200 200
Retained earnings 300 450
Total equities 1300 1500
Z Corp.
Income statement
FYE 12/31/01
Sales $ 800
Cost of sales 300
Gross margin 500
Operating expenses 100
Operating income 400
Taxes 100
Net income $300
Market price per share: $12
Dividends paid: $150(total)
16 What is the working capital for 2001?
A. 620
B. 530
C. 410
D. Some other amount
17. What is the current ratio for 2001?
A. 2.51
B. 1.33
C. 2.00
D. Some other amount
18. What is the return on assets for 2001?
A. .2222
B. .1775
C. .2857
D. Some other amount
19. What is the return on equity for 2001?
A. .52
B. .75
C. .33
D. Some other amount
20. What is the quick ratio for 2001?
A. 1.011
B. 1.086
C. 2.222
D. Some other amount
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XYZ Corp.
Balance Sheet 12/31
2000 2001
Cash
To calculate the working capital for 2001, you need to find the difference between current assets and current liabilities.
Working Capital = Current Assets - Current Liabilities
From the balance sheet for 2001:
Current Assets = Cash + Accounts Receivable + Inventory = $120 + $260 + $500 = $880
Current Liabilities = Accounts Payable = $350
Working Capital = $880 - $350
Working Capital = $530
Therefore, the working capital for 2001 is $530.
Answer: B. 530
To calculate the current ratio for 2001, you need to divide current assets by current liabilities.
Current Ratio = Current Assets / Current Liabilities
From the balance sheet for 2001:
Current Assets = $880
Current Liabilities = $350
Current Ratio = $880 / $350
Current Ratio ≈ 2.51
Therefore, the current ratio for 2001 is approximately 2.51.
Answer: A. 2.51
To calculate the return on assets for 2001, you need to divide net income by average total assets.
Return on Assets = Net Income / Average Total Assets
From the income statement for 2001:
Net Income = $300
From the balance sheet for 2000 and 2001:
Average Total Assets = (Total Assets in 2000 + Total Assets in 2001) / 2
Average Total Assets = ($1300 + $1500) / 2
Average Total Assets = $2800 / 2
Average Total Assets = $1400
Return on Assets = $300 / $1400
Return on Assets ≈ 0.2143
Therefore, the return on assets for 2001 is approximately 0.2143.
Answer: None of the given options. (The closest option is D. Some other amount)
To calculate the return on equity for 2001, you need to divide net income by average total equity.
Return on Equity = Net Income / Average Total Equity
From the income statement for 2001:
Net Income = $300
From the balance sheet for 2000 and 2001:
Average Total Equity = (Total Equities in 2000 + Total Equities in 2001) / 2
Average Total Equity = ($1300 + $1500) / 2
Average Total Equity = $2800 / 2
Average Total Equity = $1400
Return on Equity = $300 / $1400
Return on Equity ≈ 0.2143
Therefore, the return on equity for 2001 is approximately 0.2143.
Answer: None of the given options. (The closest option is D. Some other amount)
To calculate the quick ratio for 2001, you need to subtract inventories from current assets, and then divide the result by current liabilities.
Quick Ratio = (Current Assets - Inventory) / Current Liabilities
From the balance sheet for 2001:
Current Assets = $880
Inventory = $500
Current Liabilities = $350
Quick Ratio = ($880 - $500) / $350
Quick Ratio = $380 / $350
Quick Ratio ≈ 1.086
Therefore, the quick ratio for 2001 is approximately 1.086.
Answer: B. 1.086