he following is the balance sheet and income statement for Metro Eagle Outfitters, in condensed form, plus some information from the cash flow statement. Balance Sheet 2022 2021 2020 Cash and short-term investments $ 644,992 $ 759,044 $ 748,693 Accounts receivable 47,721 41,710 39,521 Inventory 346,452 395,514 315,208 Other current assets 116,635 119,220 98,988 Total current assets 1,155,800 1,315,488 1,202,410 Long-lived assets 575,832 626,482 572,802 Total assets $ 1,731,632 $ 1,941,970 $ 1,775,212 Current liabilities $ 467,902 $ 447,401 $ 401,837 Total liabilities 509,045 521,986 421,341 Shareholders’ equity 1,222,587 1,419,984 1,353,871 Total liabilities and equity $ 1,731,632 $ 1,941,970 $ 1,775,212 Income Statement Sales $ 3,478,602 $ 3,121,465 $ 2,948,094 Cost of sales 2,099,480 1,989,471 1,777,143 Gross margin $ 1,379,122 $ 1,131,994 $ 1,170,951 Operating expenses 975,684 855,385 852,176 Earnings before interest and taxes $ 403,438 $ 276,609 $ 318,775 Net income $ 246,108 $ 153,105 $ 142,047 Interest paid in cash 94 196 175 Taxes paid in cash 143,409 100,456 47,137 Cash Flows Cash flow from operations $ 576,671 $ 489,317 $ 394,416 Capital expenditures 95,339 92,266 78,704 Dividends 86,992 86,992 84,566 Required: Calculate the following liquidity ratios for Metro Eagle in 2021 and 2022: 1. Inventory turnover. 2. Current ratio. 3. Quick ratio.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter10: Inventory

Section: Chapter Questions

Problem 15Q: What insights can be gained from inventory ratio analysis, such as inventory turnover ratio and...

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Question

The following is the balance sheet and income statement for Metro Eagle Outfitters, in condensed form, plus some information from the cash flow statement.

Balance Sheet	2022	2021	2020
Cash and short-term investments	$ 644,992	$ 759,044	$ 748,693
Accounts receivable	47,721	41,710	39,521
Inventory	346,452	395,514	315,208
Other current assets	116,635	119,220	98,988
Total current assets	1,155,800	1,315,488	1,202,410
Long-lived assets	575,832	626,482	572,802
Total assets	$ 1,731,632	$ 1,941,970	$ 1,775,212
Current liabilities	$ 467,902	$ 447,401	$ 401,837
Total liabilities	509,045	521,986	421,341
Shareholders’ equity	1,222,587	1,419,984	1,353,871
Total liabilities and equity	$ 1,731,632	$ 1,941,970	$ 1,775,212
Income Statement
Sales	$ 3,478,602	$ 3,121,465	$ 2,948,094
Cost of sales	2,099,480	1,989,471	1,777,143
Gross margin	$ 1,379,122	$ 1,131,994	$ 1,170,951
Operating expenses	975,684	855,385	852,176
Earnings before interest and taxes	$ 403,438	$ 276,609	$ 318,775
Net income	$ 246,108	$ 153,105	$ 142,047
Interest paid in cash	94	196	175
Taxes paid in cash	143,409	100,456	47,137
Cash Flows
Cash flow from operations	$ 576,671	$ 489,317	$ 394,416
Capital expenditures	95,339	92,266	78,704
Dividends	86,992	86,992	84,566

Required:

Calculate the following liquidity ratios for Metro Eagle in 2021 and 2022:

1. Inventory turnover.

2. Current ratio.

3. Quick ratio.

4. Cash flow ratio.

Inventory Turnover
2022
2021
Numerator
Denominator
Current Ratio
2022
2021
Numerator
Denominator
Quick Ratio
2022
2021
Numerator
Denominator
Cash Flow Ratio
2022
2021
Numerator
Denominator

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