The formula for the return on assets is Net income divided by total assets (BPP 2009). Market share _(c) A company's percentage share of total dollar sales within its industry. Working capital _ (d) Current assets less current liabilities. Price-earnings ratio _ (e) A measure reflecting investors' expectations of future profitability. The formula for the price-earnings ratio is price per share divided by earnings per share (EPS) (BPP 2009). Quick ratio _ (f) A measure of short-term solvency often used when a company has large inventories that cannot be quickly converted into cash. The formula for the quick ratio finds the total of all current assets with the exception of inventories and divides the result by the total of all current liabilities. This ratio is the acid test for short term solvency. It takes into consideration the cash cycle of turning inventory into cash, the fact that it may take a while before the inventory and the cash s received by way of cash sale or credit sale. Additionally, inventory can become obsolete. Earnings per share _ (g) A ratio that helps individual stockholders relate the net income of a large corporation to their equity investment. The formula for earnings per share EPS is: Net income divided by number of issued shares. ...

$163,000 + $96,000 = $259,000 (3) The current ratio: 1.5 to 1 i.e. the ratio of current assets to current liabilities - $388,000/259,000 = 1.5 (4) Net Working capital: $129,000 i.e. $388,000 - $259,000 (b) Assume that Red Missile Company pays the note payable of $163,000, thus reducing cash to $17,000. Compute the following after the completion of this transaction: (1) The current ratio: 2.34 to 1 – i.e. 225,000 ($388,000 – 163,000) divided by 96,000 ($259,000 – 163,000) Calculation of current assets: Cash ($180,000 - $163,000) $17,000 Accounts Receivable $84,000 Inventory $124,000 Current assets $225,000 Calculation of current liabilities: Accounts Payable $96,000 Current liabilities $96,000 (2) Net Working capital: $129,000 - i.e. current assets minus current liabilities – $225,000 - $96,000 3- Shown below are selected items appearing in a recent balance sheet of Grant Products. (Dollar amounts are in thousands.) (a) Compute the following: (1) Total quick assets $2,770 and is calculated as follows: Calculations of Total quick assets: Cash and cash equivalents $620 Investments in marketable securities $300 Receivables $1,400 Prepaid expense and other current assets $450 Quick assets $2,770 (2) Total current assets $3,870 and is calculated as follows: Calculation of total current assets: Cash and cash equivalents $620 Investments in marketable securities $300 Receivables $1,400 Inventories $1,100 Prepaid expenses and other current assets $450 Current assets $3,870 (3) Total current liabilities $2200 i.e. $1,600 + $300 + $300 Calculation of current liabilities: Accounts payable $1,600 Bank loans payable within a year $300 Income tax payable $300 Total current liabilities
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