Managerial Accounting
7th Edition
ISBN: 9781260247886
Author: Wild
Publisher: MCG
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Textbook Question
Chapter D, Problem 22E
Exercise D-22
Calculating and interprets the debt ratio
A2
a. Compute the debt ratio for each of the three companies.
b. Which company has the most financial leverage
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Exercise 9-13A (Algo) Ratio analysis LO 9-2, 9-3, 9-4, 9-5
Following is the balance sheet of Perez Company for Year 3:
PEREZ COMPANY
Balance sheet
Assets
Cash
Marketable securities
Accounts receivable
Inventory
Property and equipment
Accumulated depreciation
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Current notes payable
Mortgage payable
Bonds payable
Common stock
Retained earnings
Total liabilities and stockholders' equity
a. Current ratio
b. Earnings per share
c. Quick (acid-test) ratio
d. Return on investment
e. Return on equity
f. Debt to equity ratio
$
17.10 per share
$ 15,350
8,380
13,160
11, 100
167,500
%
%
(12,800)
The average number of common stock shares outstanding during Year 3 was 900 shares. Net income for the year was $15,400:
Required
Compute each of the following: (Round your answer to 2 decimal places. For percentages, 0.2345 should be entered as 23.45.)
$202,690
$ 8,960
3,880
4,400
21,720
114,000
49,730
$202,690
PAARDE
A
PONEMOS
Q-1
A security analyst calculates the following ratios for the two banks:
Ratio
Bank A
Bank B
Return on Equity
22%
24%
Return on Assets
2%
2.5%
Equity Multiplier
Profit Margin
Asset Utilization
Spread
Interest Expense ratio
Provision on Loan Losses
11 X
18 X
15%
16%
13%
14%
3%
3%
35%
40%
1%
4%
i.
How should the financial analyst evaluate the financial health of the two banks?
Discuss each ratio and which bank would you prefer and why?
ii.
C
$
4
Terminology Matching
Profitability Ratios
Rationalization
Return on Assets Ratio
Return on Common Stockholders' Equity Ratio
Sarbanes-Oxley Act
Solvency Ratios
Sustainable Income
The Human Element
Times Interest Earned
Vertical Analysis
%
si se
6
&
7
*
00
8
A measure of company's solvency and ability to meet interest payments
as they come due; calculated as the sum of net income, interest
expenses and income tax expense divided by interest expense
This is a profitability measure that indicates the amount of net income
generated by each dollar of assets. It is computed as net income
divided hv average total assets
A technique for evaluating financial statement data that expresses each
item in a financial statement as a percentage of a base amount
Fatigue, carelessness, indifference, collusion
Measures of the ability of a company to survive over a long period of
time
A measure of the dollars of net income earned for each dollar invested
by the owners; computed as income available…
Chapter D Solutions
Managerial Accounting
Ch. D - Prob. 1DQCh. D - Prob. 2DQCh. D - Prob. 3DQCh. D - Prob. 4DQCh. D - Are debits or credits typically listed first in...Ch. D - Should a transaction be recorded first in a...Ch. D - Prob. 7DQCh. D - Why does the reeordkeeper prepare a trial balance?Ch. D - Prob. 9DQCh. D - Prob. 10DQ
Ch. D - Prob. 11DQCh. D - Prob. 12DQCh. D - Prob. 13DQCh. D - Define (a) assets, (b) liabilities, and (c) equityCh. D - Prob. 15DQCh. D - Review the Apple balance sheet Appendix A....Ch. D - Review the Google balance sheet in Appendix A....Ch. D - Prob. 18DQCh. D - Identify the items from the following list that...Ch. D - Prob. 2QSCh. D - Prob. 3QSCh. D - Identify the normal balance (debit or credit) for...Ch. D - Prob. 5QSCh. D - Prob. 6QSCh. D - Prob. 7QSCh. D - A trial balance has total debits of $20,000 and...Ch. D - Prob. 9QSCh. D - Prob. 10QSCh. D - Prob. 11QSCh. D - Prob. 12QSCh. D - Prob. 13QSCh. D - Prob. 14QSCh. D - Prob. 15QSCh. D - Order the following steps in the accounting...Ch. D - Prob. 2ECh. D - Enter the number for the item that best completes...Ch. D - For each of the following, (1) identify the type...Ch. D - Prob. 5ECh. D - Prob. 6ECh. D - Prepare general journal entries for the following...Ch. D - Prob. 8ECh. D - Prob. 9ECh. D - Prob. 10ECh. D - Prob. 11ECh. D - 1. Prepare general journal entries for the...Ch. D - Prob. 13ECh. D - Prob. 14ECh. D - A corporation had the following assets and...Ch. D - Carmen Camry operates a consulting firm called...Ch. D - Prob. 17ECh. D - Prob. 18ECh. D - Prob. 19ECh. D - Prob. 20ECh. D - You are told the column totals in a trial balance...Ch. D - Exercise D-22 Calculating and interprets the debt...Ch. D - Prob. 23ECh. D - Prob. 1PSACh. D - Prob. 2PSACh. D - Denzel Brooks opened a web consulting business...Ch. D - Prob. 4PSACh. D - The accounting records of Nettle Distribution show...Ch. D - Prob. 6PSACh. D - Prob. 7PSACh. D - Prob. 1PSBCh. D - Prob. 2PSBCh. D - Prob. 3PSBCh. D - Prob. 4PSBCh. D - Prob. 5PSBCh. D - Prob. 6PSBCh. D - Prob. 7PSBCh. D - Prob. 1SPCh. D - Prob. 2SPCh. D - Prob. 3SPCh. D - Prob. 1GLPCh. D - Prob. 2GLPCh. D - Prob. 3GLPCh. D - Prob. 4GLPCh. D - Prob. 5GLPCh. D - Prob. 6GLPCh. D - Prob. 7GLPCh. D - Using transactions from the following assignments...Ch. D - Prob. 1AACh. D - Prob. 2AACh. D - Prob. 3AACh. D - Prob. 1BTNCh. D - Prob. 2BTNCh. D - Prob. 3BTNCh. D - The expanded accounting equation consists of...Ch. D - Prob. 5BTNCh. D - Prob. 6BTNCh. D - Prob. 7BTN
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- RATIO ANALY SIS OF COMPARATI VE FIN ANCIAL STATE MENT S Refer to the financial statements in Problem 24-8B. REQUIRED Calculate the following ratios and amounts for 20-1 and 20-2 (round all calculations to two decimal places). (a) Return on assets (Total assets on January 1, 20-1, were 111,325.) (b) Return on common stockholders equity (Total common stockholders equity on January 1, 20-1, was 82,008.) (c) Earnings per share of common stock (The average numbers of shares outstanding were 6,300 shares in 20-1 and 6,900 in 20-2.) (d) Book value per share of common stock (e) Quick ratio (f) Current ratio (g) Working capital (h) Receivables turnover and average collection period (Net receivables on January 1, 20-1, were 28,995.) (i) Merchandise inventory turnover and average number of days to sell inventory (Merchandise inventory on January 1, 20-1, was 32,425.) (j) Debt-to-equity ratio (k) Asset turnover (Assets on January 1, 20-1, were 111,325.) (l) Times interest earned ratio (m) Profit margin ratio (n) Assets-to-equity ratio (o) Price-earnings ratio (The market price of the common stock was 120.00 and 110.00 on December 31, 20-2 and 20-1, respectively.)arrow_forward95 Conceptual Framework Information that is capable of making a difference in the decisions made by users has this qualitative characteristic. a. Relevance b. Faithful representation 2. c. Timeliness d. Verifiability 3. When making materiality judgments, the overriding consideration is a. the ability of the item being judged to influence users' decisions. b. the size of the impact of the item being judged. the characteristics of the item being judged. C. d. cand d 4. This qualitative characteristic is unique in the sense that it necessarily requires at least two items. a. Verifiability b. Faithful representation c. Timeliness d. Comparability 5. Which of the following enhances the comparability of information? a. Making unlike things look alike. b. Making like things look different. c. Using different methods to account for similar transactions from period to period. d. Consistent application of accounting policies from period to period. 6. Information has this qualitative…arrow_forwardQ2: MULTIPLE-CHOICE QUESTIONS – Financial Ratios Analysis 1- In order to assess a company's ability to fulfill its long-term obligations, an analyst would most likely examine: A. activity ratios. B1. Solvency ratio ç. liquidity ratios.arrow_forward
- Question 6 of 10 A company has total assets of $600,000 and total liabilities of $200,000. What is the company's Debt Ratio? O Debt Ratio = $400,000 (Total Assets – Total Liabilities) O Debt Ratio = 3 (Total Assets/Total Liabilities) O Debt Ratio = 0.33 (Total Liabilities / Total Assets) O Debt Ratio = $800,000 (Total Assets + Total Liabilities) Next P Type here to search 144 & # $ 8 67 E GS K SE 11 B. at gr Σ Z. 4,arrow_forwardSales transactions Using transactions listed in P4-2, indicate the effects of each transaction on the liquidity metric working capital and profitability metric gross profit percent. Indicate the gross profit percent for each sale (rounding to one decimal place) in parentheses next to the effect of the sale on the company’s ability to attain an overall gross profit percent of 30%.arrow_forward43- Contribution received from shareholders will be recorded as a. Dr Receivables Cr Cash account b. Dr Cash account Cr receivables c. Dr Capital Cr Cash account d. Dr Cash account Cr Capitalarrow_forward
- A-1: determine the amount of current assets and current liabilities for each company A-2: compute the current ratio for each company B: assuming that all assets and liabilities are listed above, compute the debt to assets ratio for each company C-1: determine which company has the greater finiancial risk in the short term C-2: determine which company has the greater financial risk in the long termarrow_forward4G e 1:E. OMANTEL Marked out of 1.00 P Flag question Wealth Maximisation comes under objective of financial managment a. Research Objectives b. None c. Operational Objectives d. Basic objectives e. Social Objectives Next page Chapter 1 Activity1arrow_forwardpter 4 Problem Solving.pdf Open with Google Docs Problem 4-10 page 112 RATIO CALCULATIONS Assume the following relationships for the Brauer Corp Sales total assets Retum on assets ROA) Return onequity (ROE) Calculate Brauer's puofit margin and debt iratio. Solationarrow_forward
- 22 Operating profit margin is also known as ________________________. a. Earnings before tax b. Earning after interest and tax c. Profit before interest and tax d. Profit after interest and taxarrow_forward17 the ratio that measures a company's success in using its assets ro earn income dor rh persons who finance the business is the what?arrow_forwarda. Cost of equity b. Cost of equity c. Cost of equity d-1. WACC d-2. WACC 9.10 % 9.76 % 12.15 % % %arrow_forward
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