P10-6B. Calculate and analyze financial ratios. (LO 3)
The following information was taken from the annual report of ROM’
| At Decembe3r1 | |
| ASSETS: | |
| Current assets: | |
| Cash | $1,220 |
| Accounts receivable | 3,112 |
| Merchandise inventory | 966 |
| Prepaid expenses | 149 |
| Total current assets | 5,447 |
| Plant and equipment: | |
| Buildings net | 2,992 |
| Equipment net | 1,045 |
| Total plant and equipment | 4,037 |
| Total assets | $9,484 |
| LIABILITIES: | |
| Current liabilities: | |
| Accounts payable | $ 1,685 |
| Notes payable | 1,100 |
| Total current liabilities | 2,785 |
| Long- term liabilities | 2,000 |
| Total liabilities | 4,785 |
| Stockholder’s Equity | |
| Common stock, no par value | 3,042 |
| Retained earnings | 1,657 |
| Total stockholder’s equity | 4,699 |
| Total liabilities and stockholder’s equity | $9,484 |
| Sales of the year | 10,200 |
| Cost of goods sold | 6,750 |
| Total assets at Dec. 31, 2007 | 8,980 |
| Total liabilities at Dec. 31, 2007 | 4,535 |
| Total stockholder’s equity at Dec. 31, 2007 | 4,445 |
Required
a. Calculate the following ratios for 2008:
1. Debt-to-equity ratio
2. Gross profit percentage
3. Current ratio
4. Acid-test ratio
b. What do the ratios indicate about the success of ROM? What additional information would be useful to help you analyze the overall performance of this company?
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