# Ratio Results of Dino After School (Essay Sample)

Refer to Dino's information below and calculate the following ratios: Working capital ratio, quick ratio/acid test, earnings per share, price-earnings ratio, debt-equity ratio, and return on equity. Clearly provide each formulae, numbers and work associated, along with the answers.

For each ratio you calculated, provide an analytic statement in which you comment on how the ratio can affect specific decisions that need to be made within the organization.

Notes:

Each statement must be at least one full paragraph, explaining the ratio results in isolation along the scale, then application to the specific business.

Specifically include throughout your analyses, decisions regarding inventory management, depreciation of company assets, employee wages, government taxes, and investment prospects. 75-150 words for each ratio.

Problem #2

1. Using your own explained, numerical, practical examples, differentiate between periodic and perpetual inventory systems. You may apply your examples to the case of Dino's After School.

2. Using your own explained, numerical, practical examples differentiate between LIFO, FIFO, and Weighted

Average as forms of inventory valuation.

3. On April 12, 2017 Dino's After School purchased $6,000 in inventory. Sales began to slow-down, so on May 12 they purchased only $2,000 worth of inventory. In June, with the start of summer when more customers are purchasing their inventory, they purchased $9,000 worth of inventory - June 20, 2017. If they had $4,780 of inventory remaining at the end of the first quarter, and sold $17,500 worth of inventory during the second quarter:

What is the ending inventory for Dino's After School at the end of June, 2017? If there was no ending inventory from the first quarter, with the same levels of sales, what would have been the cost of goods sold during the second quarter?

Problem # 3

Dino's After School has an asset, a workstation where customers can find school homework assignments and hints for the correct answers. Its original cost was $12,700 and it has a salvage

value of $1, 270 and 7 years of useful life.

1. Calculate the annual depreciation expense under the straight-line method.

2. Assume depreciation rate under the Double Declining Balance Method to be 30%, then calculate the annual depreciation for each year (using the Double Declining Balance Method), and find the book value of the asset at the end of the 7th year

3. Explain how the depreciation amount is included on the balance sheet, and why it is needed for the balance sheet. (50-100 words)

Problem # 4

Explain, in your own words, the concepts of adjustments and closing entries as covered in the Accounting 302 course. In your explanations, use examples (with numbers) to demonstrate your understanding of the concepts. For this assignment, please include 1-3 sentences discussing the relationship between the two concepts. Note: 200-300 words

Assignment questions

Name

Course

Instructor

Date

Problem 1: Analysis

Ratio

Formula

answer

Working capital ratio

Current assets/current liabilities

1.846154

Quick ratio

(current assets-inventory)/current liabilities

1.692308

earnings per share

Net income/weighted average shares

1.2

price-earnings ratio

Market price/earnings per share

16.66667

debt-equity ratio

Total debt/equity

1.421053

return on equity

Net income/equity

0.157895

Working capital ratio

The working capital ratio is a liquidity ratio used to evaluate the ability of a company to pay off its short-term obligations. A ratio of one shows that a company has just enough current assets to pay off its current liabilities. In contrast, a less than one ratio indicates that the company will struggle to pay off its liabilities. From the analysis, Dino company has a ratio of 1.846, meaning they can smoothly pay their short-term obligations. However, too much ratio would mean the company is ineffective in managing working capital since many available current assets can be re-invested.

Quick ratio/acid-test

The quick ratio is also a liquidity ratio that evaluates the capacity of a company to pay off its short-term obligations without using inventory. It uses the most liquid assets of a company to repay its debts. A ratio of one or more is desirable because it shows that a company can settle its short-term liabilities using its most liquid assets. From the analysis, Dino company had a ratio of 1.692, which is more than one, meaning that the company can settle its short-term obligations using its most liquid assets without selling its inventories.

Earnings per Share (EPS)

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