E 12-22A

a.

b.

Current ratio:
20X6:

$21,000 + $32,000 + $117,000 + $243,000 + $18,000

= 1.74
$247,000

20X5:

$53,000 + $15,000 + $127,000 + $272,000 + 4,000

$312,000

Acid-test ratio:
$21,000 + $32,000 + $117,000
$247,000

20X6:

$53,000 + $15,000 + $127,000

$312,000

20X5:
c.

= 1.51

0.69

0.63

Debt ratio:
20X6:

$274,000*
= 0.55
$500,000

20X5:

$446,000**
= 0.84
$531,000

_____
_____
*$247,000 + $27,000 = $274,000.

d.

**$312,000 + $134,000 = $446,000

Times-interest-earned ratio:
20X6:

$191,000
= 4.90
$39,000

20X5:

$160,000
= 3.56
$45,000

Summary: The companys ability to pay current liabilities, long-term

debt, and interest expense improved during 20X6, as
shown by the improvement in all four ratios.

E 12-23A
(Dollars in thousands)
a.

Rate of return on net sales:

20X6:

$16,000
= 0.160
$100,000

20X5:

$17,000
$90,000

= 0.189

b. Rate of return on total assets:

20X6:

$16,000
$102,000*

= 0.157

$17,000
$91,500**

20X5:

_____

_____

*($104,000 + $100,000) / 2 = $102,000.

c.

**($100,000 + $83,000) / 2 = $91,500.

Rate of return on ordinary shareholders equity:

20X6:

$16,000 $3,000
= 0.183
$71,000***

20X5:

$17,000 $2,000
= 0.216
$69,500****

_____

_____

***($72,000 + $70,000) / 2 = $71,000.

d.

= 0.186

****($70,000 + $69,000) / 2 = $69,500.

Earnings per share of ordinary share:

20X6

$16,000 $3,000
= $1.30
10,000

20X5:

$17,000 $2,000
= $1.67
9,000

The companys operating performance declined during 20X6. All four

profitability measures decreased.