Ratios Analyses: McCormick Refer to the information for McCormick above. Additional information for 20X3 it as follows (amounts in millions):
Required:
Next Level Compute the following for 20X3. Provide a brief description of what each ratio reveals about McCormick
- 1. return on common equity
- 2. debt-to-assets
- 3. debt-toequity
- 4. current
- 5. quick (McCormick uses cash and equivalents, short-term securities and receivables in their quick ratio calculation.)
- 6. inventory turnover days
- 7. accounts receivable turnover days
- 8. accounts payable turnover days
- 9. operating cycle (in days)
- 10. total asset turnover
Use the following information for 14-17 and 14-18:
The Hershey Company is one of the world’s leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hershey’s consolidated balance sheets for 20X2 and 20X3 follow.
Requirement 1:
Determine the return on common equity ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the return on common equity ratio of C&C Incorporation for 20X3:
Step 1: Calculate the average total common stockholders’ equity.
Step 2: Calculate the return on common equity ratio of C&C Incorporation for 20X3.
Hence, the return on common equity ratio of C&C Incorporation for 20X3 is 0.213.
Comment:
Return on common equity ratio indicates that C&C Incorporation generated a 21.3% return for its common shareholders.
Requirement 2:
Determine the debt-to-assets ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the debt-to-assets ratio of C&C Incorporation for 20X3:
Hence, the debt-to-assets ratio of C&C Incorporation for 20X3 is 0.562.
Comment:
Debt-to-assets ratio indicates that C&C Incorporation’s 56.2% of total assets are financed by its creditors.
Requirement 3:
Determine the debt-to-equity ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the debt-to-equity ratio of C&C Incorporation for 20X3:
Hence, the debt-to- equity ratio of C&C Incorporation for 20X3 is 1.28.
Comment:
Debt-to-assets ratio indicates that C&C Incorporation has $1.28 in total liabilities for every of $1.00 in equity.
Requirement 4:
Determine the current ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the current ratio of C&C Incorporation for 20X3:
Hence, the current ratio of C&C Incorporation for 20X3 is 1.29.
Comment:
Current ratio indicates that C&C Incorporation has $1.29 in current assets for every of $1.00 in current liabilities.
Requirement 5:
Determine the quick ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the quick ratio of C&C Incorporation for 20X3:
Hence, the quick ratio of C&C Incorporation for 20X3 is 0.53.
Comment:
Quick ratio indicates that C&C Incorporation has $0.53 in quick assets (cash and receivables) for every of $1.00 in current liabilities.
Requirement 6:
Determine the inventory turnover in days of C&C Incorporation for 20X3.
Explanation of Solution
Determine the inventory turnover in days of C&C Incorporation for 20X3:
Step 1: Calculate the average inventory.
Step 2: Calculate the inventory turnover.
Step 3: Calculate the inventory turnover in days of C&C Incorporation for 20X3.
Hence, the inventory turnover days of C&C Incorporation for 20X3 are 95.93 days.
Comment:
On an average C&C Incorporation takes 100 days to convert inventory into sales in the operation cycle.
Requirement 7:
Determine the accounts receivable turnover in days of C&C Incorporation for 20X3.
Explanation of Solution
Determine the accounts receivable turnover in days of C&C Incorporation for 20X3:
Step 1: Calculate the average accounts receivable.
Step 2: Calculate the accounts receivable turnover.
Step 3: Calculate the accounts receivable turnover in days of C&C Incorporation for 20X3.
Hence, the accounts receivable turnover days of C&C Incorporation for 20X3 are
Comment:
On an average C&C Incorporation takes 43 days to collect its receivables from its customers.
Requirement 8:
Determine the accounts payable turnover in days of C&C Incorporation for 20X3.
Explanation of Solution
Determine the accounts payable turnover in days of C&C Incorporation for 20X3:
Step 1: Determine the amount of inventory purchases.
Step 2: Calculate the average accounts payable.
Step 3: Calculate the accounts payable turnover.
Step 4: Determine the accounts payable turnover in days.
Hence, the accounts payable turnover in days of C&C Incorporation for 20X3 is 55.3 days.
Comment:
On an average C&C Incorporation takes 55 days to pay its payables to its suppliers.
Requirement 9:
Determine the operating cycle in days of C&C Incorporation for 20X3.
Explanation of Solution
Determine the operating cycle in days of C&C Incorporation for 20X3:
Hence, the operating cycle in days of C&C Incorporation for 20X3 is 83.2 days.
Comment:
C&C Incorporation takes 83.2days to complete an operating cycle (the purchase of inventory and collection of cash from accounts receivable).
Requirement 10:
Determine the total assets turnover ratio of C&C Incorporation for 20X3.
Explanation of Solution
Determine the total assets turnover ratio of C&C Incorporation for 20X3:
Step 1: Calculate average total assets.
Step 2: Calculate the total assets turnover ratio of C&C Incorporation for 20X3.
Hence, the total assets turnover ratio of C&C Incorporation for 20X3 is 0.96.
Comment:
Total assets turnover ratio indicates that C&C Incorporation has generated $0.96 in sales for every of $1.00 in assets
Want to see more full solutions like this?
Chapter 4 Solutions
Intermediate Accounting: Reporting And Analysis
- Liquidity Ratios NWAs financial statements contain the following information: Note: Round answers to two decimal places. Required: 1. What is its current ratio? 2. What is its quick ratio? 3. What is its cash ratio? 4. Discuss NWAs liquidity using these ratios.arrow_forwardA Preparation of Ratios Refer to the financial statements for Burch Industries in Problem 12-89A and the following data. Required: 1. Prepare all the financial ratios for Burch for 2019 and 2018 (using percentage terms where appropriate and rounding all answers to two decimal places). 2. CONCEPTUAL CONNECTION Explain whether Burchs short-term liquidity is adequate. 3. CONCEPTUAL CONNECTION Discuss whether Burch uses its assets efficiently. 4. CONCEPTUAL CONNECTION Determine whether Burch is profitable. 5. CONCEPTUAL CONNECTION Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm. 6. Perform a Dupont analysis (rounding to two decimal places) for 2018 and 2019.arrow_forwardSelect the Income Statements and Balance Sheets of Aramco Saudi from the calculate the following financial ratios: a. Long-term debt ratios b. Total debt ratio c. Times interest earned d. Cash coverage ration e. current ratio f. Quick ratio g. Operating profit margin h. Inventory Turnover i. Days in inventory j. Average collection period k. Return on equity I. Return on assets m. Payout rationsarrow_forward
- As part of your analysis, you are required to investigate DEVCON Industries' cash flows and selected ratios. Required: Using the financial statement provided on page 1: (a) Compute the following ratios for DEVCON Industries for 2018 and 2019: i. Return on Equity using Du Pont Identity ii. Earnings Per Share (EPS iii. Price/Earning (P/E) Ratioarrow_forwardFind the following using the data bellow Accounts receivable = 111,100,000 Current assets = 316,500,000 Total assets = 600,000,000 A. Return on assets B. Common equity C .Quick ratioarrow_forwardQuestion 1 Mabel is a potter and sells her pottery at stalls that she rents in four tourist information centres across the south of England. Extracts from her financial statements for the years ended 31 December 2021 and 2020 are shown below. Statement of profit or loss for the year ended 31 December: 2021 28,900 |(16,500) 12,400 (3,800) 8,600 |(4,000) 4,600 2020 Revenue 27,200 (14,000) 13,200 (3,600) 9,600 Cost of sales Gross profit Operating expenses Operating profit Non-operating expenses Net profit 9,600 Statement of financial position as at 31 December: 2021 Non-current assets Current assets Total assets 22,660 4,360 27,020 2020 20,920 3,750 24,670 Equity Non-current liabilities Current liabilities Equity and liabilities 20,940 3,000 3,080 27,020 16,340 3,500 4,830 24,670 The following information is also relevant: In July 2021 the rent on one of Mabel's stalls was increased significantly for the third time in three years so she decided not to renew the annual contract. She sold…arrow_forward
- Calculating the Current Ratio and the Quick (or Acid-Test) Ratio Hannah Company has current assets equal to $3,800,000. Of these, $1,200,000 is cash, $1,800,000 is accounts receivable, $500,000 is inventory, and the remainder is marketable securities. Current liabilities total $2,073,000. Required: Note: Round answers to two decimal places. 1. Calculate the current ratio.fill in the blank 1 2. Calculate the quick ratio (acid-test ratio).fill in the blank 2arrow_forwardGiven the balance sheet in Table P3.2, calculate the following ratios:(a) Current ratio(b) Quick ratio(c) Debt-equity ratio Review table P3.2 image belowarrow_forwarda. Compute the current ratio for the current year. (Abbreviations used: STI = Short-term investments. Round your answer to two decimal places, X.XX.) Current ratio More Info a. Current ratio b. Cash ratio c. Acid-test ratio d. Inventory turnover e. Days' sales in inventory f. Days' sales in receivables g. Gross profit percentage Print Done Choose from any list or enter any number in the input fields a Financial Statements Balance Sheet: Cash Short-term Investments Net Accounts Receivables Merchandise Inventory Prepaid Expenses Total Current Assets Total Current Liabilities Income Statement: Net Credit Sales Cost of Goods Sold $ Current Year Preceding Year 15,000 $ 11,000 56,000 64,000 13,000 159,000 132,000 465,000 317,000 29,000 27,000 94,000 82,000 7,000 239,000 89,000arrow_forward
- Hello! look at the attached images and answer: (a) Calculate ratios for the year ended 31 December 2021 (showing your workings) for Primrose Plc, equivalent to those provided above. i. Return on year-end capital employed ii. Net asset turnover iii. Gross profit margin iv. Net profit margin v. Current ratio vi. Closing inventory holding period vii. Trade receivables’ collection period viii. Trade payables’ payment period ix. Dividend yield x. Dividend cover (b) Analyse the financial performance and position of Primrose Plc for the year ended 31 December 2021 compared to 31 December 2020. (c) Explain the uses and the general limitations of ratio analysis. Thanks a lot!arrow_forward1. Download the financial statements of Gulf Mushroom Products Company 2022 from the Muscat Securities Market website (Muscat Stock Exchange (msx.om)) 2. Calculate the following ratios: A) Dividend coverage b) Interest coverage C) P/E ratio D) gross profit margin E) return on assets f) Current ratio g) Quick ratio h) Earnings per share 3. Analyzing and interpreting ratios 4. Based on your analysis and interpretation, prepare a detailed and effective report to management on the company's performance for 2022.arrow_forwardI need help figuring: G. operating profit margin H. Long-term debt ratio (use end of year balance sheet figure) I. Total debt ratio (use end of your balance sheet figures) J. Times interest earn K. Cash coverage ratio L. Current ratio (use end of your balance sheet figures) M. Quick ratio (use end of your balance sheet figures)arrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,