a)
Ratio of liabilities to
To Compute: The ratio of liabilities to stockholders' equity of Company A and Company B.
b)
To derive: A conclusion regarding the margin of protection to the creditors from the ratio of liabilities to stockholders' equity of Company A and Company B.
Trending nowThis is a popular solution!
Chapter 1 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 14th + Working Papers For Warren/reeve/duchac's Corporate Financial Accounting, 14th + ... Financial & Managerial Accounting,
- Effect of Business Strategy on Common-Size Income Statements. Access the investor relations or corporate information section of the websites of Apple Computer (www.apple.com) and Dell (www.dell.com). Study the strategies of each firm. Examine the following common-size income statements and indicate which firm is likely to be Apple Computer and which is likely to be Dell. Explain your reasoning. Indicate any percentages that seem inconsistent with their strategies.arrow_forwardSpecialty Department Stores chief executive officer (CEO) has asked you to compare the company's profit performance and financial position with the average for the industry. The CEO has given you the company's income statement and balance sheet, as well as the industry average data for retailers. Assets \table[[Current assets, %,.71.1%arrow_forwardDuPont system of analysis Use the following financial information for AT&T and Verizon to conduct a DuPont system of analysis for each company. Sales Earnings available for common stockholders Total assets Stockholders' equity a. Which company has the higher net profit margin? Higher asset turnover? b. Which company has the higher ROA? The higher ROE? c. Which company has the higher financial leverage multiplier? a. Net profit margin (Round to three decimal places.) AT&T Net profit margin AT&T $164,000 13,333 403,921 201,934 Verizon Verizon $126,280 13,608 244,280 24,232arrow_forward
- Most investors and analysts in the financial community pay particular attention to a company's ROE. The ROE can be calculated simply by dividing a firm's net income by the firm's shareholder's equity, and it can be subdivided into the key factors that drive the ROE. Investors and analysts focus on these drivers to develop a clearer picture of what is happening within a company. An analyst gathered the following data and calculated the various terms of the DuPont equation for three companies: Company A Company B Company C ROE 12.0% 15.5% 21.5% Profit Margin 57.3% 58.2% 58.0% X Total Assets Turnover X Equity Multiplier 9.8 10.2 10.3 2.14 2.61 3.60 Referring to these data, which of the following conclusions will be true about the companies' ROES? O The main driver of Company A's inferior ROE, as compared with that of Company B's and Company C's ROE, is its use of higher debt financing. O The main driver of Company C's superior ROE, as compared with that of Company A's and Company B's ROE,…arrow_forward1. Ratio analysis A company reports accounting data in its financial statements. This data is used for financial analyses that provide insights into a company's strengths, weaknesses, performance in specific areas, and trends in performance. These analyses are often used to compare a company's performance to that of its competitors or to its past or expected future performance. Such insight helps managers and analysts improve their decision making. Consider the following scenario: You work for a brokerage firm. Your boss asked you to analyze Blue Parrot Manufacturing's performance for the past three years and to write a report that includes a benchmarking of the company's performance. Which of the following components would be best for you to include in your financial statement analysis? A critique of the company's financial statements and a report of any misprints to be sent to the Securities and Exchange Commission A calculation of financial ratios and an evaluation of the…arrow_forwardDuPont identity. For the firms in the popup window, LOADING... , find the return on equity using the three components of the DuPont identity: operating efficiency, as measured by the profit margin (net income/sales); asset management efficiency, as measured by asset turnover (sales/total assets); and financial leverage, as measured by the equity multiplier (total assets/total equity). First, find the equity of each company. The equity for PepsiCo is $nothing million. (Round to the nearest million dollars.) Help Me Solve ThisView an Example Get More Help Clear All Check Answer Financial Information ($ in millions, 2013) Company Sales Net Income Total Assets Liabilities PepsiCo $66,352 $6,769 $77,328 $53,162 Coca-Cola $46,818 $8,528 $90,042 $56,761 McDonald's $28,089 $5,826 $36,544 $20,553 PrintDonearrow_forward
- Here you will find some income statements and balance sheets for Sears Holdings (SHLD) and Taget Corp (TGT). Assume that you are a financial manager at Sear and want to compare your firm’s situation with that of Target. Calculate represenatative ratios for liquidity, asset management efficiency, financial leverage (capital structure), and profitability for both Sears and Target. How would you summarize the financial performance of Sears compared to target (its benchmark firm)? Include Sears and Targets current ratio, acid-test ratio, average collection period, accounts receivable turnover, inventory turnover, debt ratio, timed interest earned, total asset turnover, fixed asset turnover, gross profit margin, operating profit margin, net profit margin, operating return on assets, and return on equity.arrow_forwardGo to www.google.com and search "reuters, markets, companies and best buy". Click on BBY.N and find all the ratios for best buy. How is the company performing in each ratio category presented in the website?arrow_forwardComplete the common-size and common-base year financial statements [Income Statement (IS) and Balance Sheet (BS)] or Brady Corp. Include spark lines to easily show the trends. Write a brief analysis in the Excel worksheet of the main trends that you notice. Perform the 3 step DuPont Return on Equity (ROE) analysis for Brady Corp. using cell references. Write a brief analysis from the DuPont analysis on Excel worksheet.arrow_forward
- You are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011. Required: (b) Analyze the current financial position for the company from a time series and cross section viewpoint. (c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios. Historical and Industry Average Ratios HTS Software , Inc. Ratio 2010 2011 Industry2011 Current Ratio 2.6 — 2.7 Quick Ratio 1.8 — 1.75 Inventory Turnover 4.5 — 4.7 Average Collection Period 40days — 42 days Total Asset Turnover 1.2 — 1 Debt Ratio 20% — 21% Times Interest Earned 9 — 8.9 Gross Profit Margin 43% — 44% Operating Profit Margin 30% — 32% Net Profit Margin 20% — 21% Return on total assets 12% — 13% Return on Equity Price/Earnings Ratio 15% 7.3 — — 16% 8 Balance SheetHTS Software, Inc.December 31,…arrow_forwardYou are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011. Required: (a) Calculate the ratios stated in the table below for HTS Software, Inc. for 2011 (b) Analyze the current financial position for the company from a time series and cross section viewpoint. (c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios. Historical and Industry Average Ratios HTS Software , Inc. Ratio 2010 2011 Industry2011 Current Ratio 2.6 — 2.7 Quick Ratio 1.8 — 1.75 Inventory Turnover 4.5 — 4.7 Average Collection Period 40days — 42 days Total Asset Turnover 1.2 — 1 Debt Ratio 20% — 21% Times Interest Earned 9 — 8.9 Gross Profit Margin 43% — 44% Operating Profit Margin 30% — 32% Net Profit Margin 20% — 21% Return on total assets 12% — 13% Return on Equity Price/Earnings Ratio…arrow_forwardSummary: Select One Company listed in Muscat securities market Download the income and Balance sheet of that company Calculate the following ratios a. Gross profit ration b.Net Profit ratio c. Current Ratio d. Liquid ratio. Analyze the ratios and give you a report on the same. Give a brief description of the company in your own words.arrow_forward
- Financial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Financial Reporting, Financial Statement Analysis...FinanceISBN:9781285190907Author:James M. Wahlen, Stephen P. Baginski, Mark BradshawPublisher:Cengage LearningFundamentals of Financial Management, Concise Edi...FinanceISBN:9781305635937Author:Eugene F. Brigham, Joel F. HoustonPublisher:Cengage Learning
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning