FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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A company’s current year net income (after income tax) is 25% larger than that of the preceding year.
Does this indicate improved operating performance? Why or why not?
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- Which of the following statements is TRUE? When EBIT and total assets both increase by 25%, the basic earnings power will also increase O a. An increase in the quick ratio over time means that the company's liquidity position is improving. O b. approximately by 25%. A lower than the industry's average inventory turnover ratio means that the company turns over or sells O C. and replaces its inventory more times per year. A higher than industry average P/E ratio indicates the company's stock must be overvalued. d.arrow_forwardSuppose the following model describes changes in Company ABC’s sales: ∆ ABCt = 0.078 - 0.095(∆ ABCt-1) The current change (first difference) in the company’s sales growth rate is 0.04. Use this information to answer the questions below. (NB: For all the questions below, give your final answers to 3 decimal places.) 1. Calculate the mean-reverting level for changes in the company’s sales growth rate. (Give your answer in decimals). 2. What is the best prediction of the next change? (Give your answer in decimals) 3. What is the prediction of the change following the next change? (Give your answer in decimals) 4. blanks. Suppose we want to compute the four-quarter moving average of Company ABC’s sales as of the beginning of the first quarter of 2022. ABCs sales in the previous four quarters were as follows: 1Q 2021, R 1,200,000; 2Q 2021, R 800,000; 3Q 2021, R 750,000; and 4Q 2021, R 1,600,000. Calculate the four-quarter moving average of sales as of the beginning of the first…arrow_forwardCompute the following profitability ratios of the company for the most recent two years, show all values in the computations: 1.Asset Turnover 2.Profit margin ratio(Net Income/Net Sales) 3.Return on total assets (Net Income/Average Total Assets) 4.Return on stockholders’ equity 5.Basic Earnings per share (EPS) Based on the results above, what conclusions can you make about the company’s overall profitability and efficient use of assets?arrow_forward
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