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New Corporation an up-and-coming biotech company, provides the following selected financial statement information. Financial information for Benchmark Corporation a well-established biotech company whose financial ratios represent the gold-standard in the industry, is also provided. Cash and cash equivalents Short-term investments Accounts receivable Property, plant and equipment Intangible assets Long-term investments Total asset Total liabilities New Corporation 2024 2023 2824 Benchmark Corporation 2023 $ 350,656 490,545 32,588 852,459 $ 238,446 $ 4,207,872 353,192 23,137 588,197 9,320,355 782,112 18,754,098 $ 3,997,478 8,947,541 766,470 17,816,393 2,565,875 1,545,856 1,796,113 1,082,099 41,054,000 46,375,680 4,081,184 571,366 3,509,819 120 494,117 45787,764 74,706,353 $ 245,253,656 88,291,316 1,373,633 1,670,881 39,822,380 45,448,166 116,798,428 43,215,419 73,583,010 $ 240,348,583 84,122,004 1,361,286 1,523,080 S Total stockholders' equity 5,837,979 875,697 4,962,282 Net sales Operating income Interest expense Investment income $ 7,865,315 1,179,797 39,406 81,456 $ 5,112,455 1,610,423 26,569 45,929 Required: 1. Calculate the cash holdings ratio for both companies. What conclusions do you draw about the cash holdings of New Corporation? 2. Calculate the investment-to-assets ratio for both companies. What conclusions do you draw about the New Corporation level of investment? 3. Calculate the return on investments ratio for both companies. What conclusions do you draw about the riskiness of New Corporation Investments?

New Corporation an up-and-coming biotech company, provides the following selected financial statement information. Financial information for Benchmark Corporation a well-established biotech company whose financial ratios represent the gold-standard in the industry, is also provided. Cash and cash equivalents Short-term investments Accounts receivable Property, plant and equipment Intangible assets Long-term investments Total asset Total liabilities New Corporation 2024 2023 2824 Benchmark Corporation 2023 $ 350,656 490,545 32,588 852,459 $ 238,446 $ 4,207,872 353,192 23,137 588,197 9,320,355 782,112 18,754,098 $ 3,997,478 8,947,541 766,470 17,816,393 2,565,875 1,545,856 1,796,113 1,082,099 41,054,000 46,375,680 4,081,184 571,366 3,509,819 120 494,117 45787,764 74,706,353 $ 245,253,656 88,291,316 1,373,633 1,670,881 39,822,380 45,448,166 116,798,428 43,215,419 73,583,010 $ 240,348,583 84,122,004 1,361,286 1,523,080 S Total stockholders' equity 5,837,979 875,697 4,962,282 Net sales Operating income Interest expense Investment income $ 7,865,315 1,179,797 39,406 81,456 $ 5,112,455 1,610,423 26,569 45,929 Required: 1. Calculate the cash holdings ratio for both companies. What conclusions do you draw about the cash holdings of New Corporation? 2. Calculate the investment-to-assets ratio for both companies. What conclusions do you draw about the New Corporation level of investment? 3. Calculate the return on investments ratio for both companies. What conclusions do you draw about the riskiness of New Corporation Investments?

Financial Accounting
Financial Accounting
15th Edition
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Carl Warren, James M. Reeve, Jonathan Duchac
Chapter15: Investments And Fair Value Accounting
Section: Chapter Questions
Problem 2CP
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New Corporation an up-and-coming biotech company, provides the following selected financial statement information. Financial information for Benchmark Corporation a well-established biotech company whose financial ratios represent the gold-standard in the industry, is also provided. Cash and cash equivalents Short-term investments Accounts receivable Property, plant and equipment Intangible assets Long-term investments Total asset Total liabilities New Corporation 2024 2023 2824 Benchmark Corporation 2023 $ 350,656 490,545 32,588 852,459 $ 238,446 $ 4,207,872 353,192 23,137 588,197 9,320,355 782,112 18,754,098 $ 3,997,478 8,947,541 766,470 17,816,393 2,565,875 1,545,856 1,796,113 1,082,099 41,054,000 46,375,680 4,081,184 571,366 3,509,819 120 494,117 45787,764 74,706,353 $ 245,253,656 88,291,316 1,373,633 1,670,881 39,822,380 45,448,166 116,798,428 43,215,419 73,583,010 $ 240,348,583 84,122,004 1,361,286 1,523,080 S Total stockholders' equity 5,837,979 875,697 4,962,282 Net sales Operating income Interest expense Investment income $ 7,865,315 1,179,797 39,406 81,456 $ 5,112,455 1,610,423 26,569 45,929 Required: 1. Calculate the cash holdings ratio for both companies. What conclusions do you draw about the cash holdings of New Corporation? 2. Calculate the investment-to-assets ratio for both companies. What conclusions do you draw about the New Corporation level of investment? 3. Calculate the return on investments ratio for both companies. What conclusions do you draw about the riskiness of New Corporation Investments?
Transcribed Image Text:New Corporation an up-and-coming biotech company, provides the following selected financial statement information. Financial information for Benchmark Corporation a well-established biotech company whose financial ratios represent the gold-standard in the industry, is also provided. Cash and cash equivalents Short-term investments Accounts receivable Property, plant and equipment Intangible assets Long-term investments Total asset Total liabilities New Corporation 2024 2023 2824 Benchmark Corporation 2023 $ 350,656 490,545 32,588 852,459 $ 238,446 $ 4,207,872 353,192 23,137 588,197 9,320,355 782,112 18,754,098 $ 3,997,478 8,947,541 766,470 17,816,393 2,565,875 1,545,856 1,796,113 1,082,099 41,054,000 46,375,680 4,081,184 571,366 3,509,819 120 494,117 45787,764 74,706,353 $ 245,253,656 88,291,316 1,373,633 1,670,881 39,822,380 45,448,166 116,798,428 43,215,419 73,583,010 $ 240,348,583 84,122,004 1,361,286 1,523,080 S Total stockholders' equity 5,837,979 875,697 4,962,282 Net sales Operating income Interest expense Investment income $ 7,865,315 1,179,797 39,406 81,456 $ 5,112,455 1,610,423 26,569 45,929 Required: 1. Calculate the cash holdings ratio for both companies. What conclusions do you draw about the cash holdings of New Corporation? 2. Calculate the investment-to-assets ratio for both companies. What conclusions do you draw about the New Corporation level of investment? 3. Calculate the return on investments ratio for both companies. What conclusions do you draw about the riskiness of New Corporation Investments?
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