Answer To Accounting Question IFS Test No 3 On Interpretation of Financial Statements

Answer to Accounting Test Question IFS No 3:

(a) current ratio

= Current asset/current liabilities

= ($200,000+$810,000+$830,000)/$710,000)

= 2.59

(b) acid-test ratio

= (Current assets- inventory)/current liabilities

=($200,000+$810,000)/$710,000

= 1,42

(c) debt to equity ratio

= (Total liabilities)/Shareholders fund

=($710,000+$550,000)/($1,500,000+$1,670,000)

=0.39

(a) times interest earned ratio

=(Net Income+ Interest Expense+ Income Tax)/Interest Expense

=($210,000+$40,000+$150,000)/$40,000

=10 times