Ratio Formulas: 1. Current Ratio Current ratio = Current ass…
Ratio Formulas: 1. Current Ratio Current ratio = Current assets{\Current liabilities 2. Acid-Test Ratio Acid-test ratio = {Cash}+Short-term investments+Net accounts receivable\tCurrent liabilities 3. Accounts Receivable Turnover Accounts receivable turnover = Net credit sales\Average net accounts receivable\{Average net accounts receivable} = {Beginning net accounts receivable}+{Ending net accounts receivable}/2 4. Inventory Turnover Inventory turnover =Cost of goods sold/Average inventory} = {Beginning inventory}+{Ending inventory/2} 5. Return on Assets Return on assets = Net income\{Average total assets X 100\Average total assets = {Beginning total assets}+{Ending total assets/2} 6. Profit Margin on Sales Profit margin on sales = {Net income\Net sales} X 100 Prior Company reports the following ratios for 2025: Current ratio: 3.22 times Acid-test ratio: 1.38 times Accounts receivable turnover: 11.8 times Inventory turnover: 2.0 times Return on assets: 23.76% Profit margin on sales: 21.95% Assume that industry averages, competitors’ ratios, and Prior Company’s prior-year ratios are unavailable. Which conclusions are supported by the information provided? Select all that apply.
Read Details