Financial Accounting
5th Edition
ISBN: 9781618531650
Author: Thomas Dyckman
Publisher: Cambridge Business Publishers
expand_more
expand_more
format_list_bulleted
Question
Chapter 1, Problem 48CP
a.
To determine
Compute the return on equity ratio for company J and company S for the year 2013 and indicate the company that earned a higher return for its shareholders.
b.
To determine
Compute the debt-to-equity ratio for company J and company S as of December 31, 2013 and indicate the company that relies more on creditor financing.
c.
To determine
Compute the net income as a percentage of revenue in 2013 for both companies.
d.
To determine
Compare the ratios of both competitors and indicate the cause for the differences in the ratios.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
You 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…
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
2.08
2.7
Quick Ratio
1.8
1.32
1.75
Inventory Turnover
4.5
6
4.7
Average Collection Period
40days
9.125
42 days
Total Asset Turnover
1.2
1.69
1
Debt Ratio
20%
28.2%
21%
Times Interest Earned
9
5.9%
8.9
Gross Profit Margin
43%
42.8%
44%
Operating Profit Margin
30%
25.5%
32%
Net Profit Margin
20%
17%
21%
Return on total assets
12%
4.11%
13%
Return on Equity
Price/Earnings Ratio
15%
7.3
19%
4.4
16%
8…
You 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…
Chapter 1 Solutions
Financial Accounting
Ch. 1 - Prob. 1MCCh. 1 - Prob. 2MCCh. 1 - Prob. 3MCCh. 1 - Prob. 4MCCh. 1 - Prob. 5MCCh. 1 - Prob. 1QCh. 1 - Prob. 2QCh. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5Q
Ch. 1 - Prob. 6QCh. 1 - Prob. 7QCh. 1 - Prob. 8QCh. 1 - Prob. 9QCh. 1 - Prob. 10QCh. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - Prob. 13QCh. 1 - Prob. 14QCh. 1 - Prob. 15QCh. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - Prob. 19MECh. 1 - Prob. 20MECh. 1 - Prob. 21MECh. 1 - Prob. 22MECh. 1 - Prob. 24MECh. 1 - Prob. 25MECh. 1 - Prob. 26MECh. 1 - Prob. 27ECh. 1 - Prob. 28ECh. 1 - Prob. 29ECh. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Prob. 32ECh. 1 - Prob. 33ECh. 1 - Prob. 34ECh. 1 - Prob. 35ECh. 1 - Prob. 36PCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Prob. 39PCh. 1 - Prob. 40PCh. 1 - Prob. 41PCh. 1 - Prob. 42PCh. 1 - Prob. 43PCh. 1 - Prob. 44PCh. 1 - Prob. 45PCh. 1 - Prob. 46CPCh. 1 - Prob. 47CPCh. 1 - Prob. 48CPCh. 1 - Prob. 49CPCh. 1 - Prob. 50CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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_forwarda) Calculate the following ratios for 2016 and 2015, showing detailed calculations as to how you arrive at each number. A ROE B Gross profit margin C Total asset turnover D Inventory turnover E Current ratio F Debt-to-equity G Interest coverage ratio. b) Using the financial statements and the ratios calculated above (and any other ratios you like to calculate), discuss the performance of Cobham PLC in 2016. c) Critically discuss the need for the public limited companies to prepare a Statement of Cash Flows and explain the usefulness of the information contained therein from the perspective of a financial analyst.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.arrow_forward
- A company’s comparative statements are given below. Please conduct the following analyses: c. Calculate the three profitability ratios for year 2017 and show how ROE can be derived from the DuPont formula for this company. d. What do the analyses tell you about the company’s financial performance?arrow_forwardCalculate the following ratios for F. Raser for the year ended 31 May 2016. State clearly the formulae used for each ratio. Return on capital employed Gross profit percentage Net profit percentage Quick/Acid test ratio Receivables collection period Earnings per share Using the additional information given and the ratios you calculated in part (a), write a brief report on the financial performance of F. Raser. Indicate in your report what additional information might be useful to help interpret the ratios. © List two factors F. Raser should consider in deciding whether to raise finance by issuing loan notes rather than issuing sharesarrow_forwardThe financial statements for Tyler Toys, Inc. are shown in the popup window: LOADING... . Calculate the debt ratio, times interest earned ratio, and cash coverage ratio for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,575 $13,566,748 Cost of goods sold $-8,448,000 $-8,132,335 Selling, general, andadministrative expenses $-998,406 $-980,458 Depreciation $-1,497,529 $-1,471,013 EBIT $3,202,640 $2,982,942 Interest expense $-376,217 $-354,594 Taxes $-1,074,041 $-998,772 Net income $1,752,382 $1,629,576 Right-click on the table and select Copy to Clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its…arrow_forward
- The financial statements for Tyler Toys, Inc. are shown in the popup window: LOADING... . Calculate the profit margin, return on assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,094 $13,567,551 Cost of goods sold $-8,448,688 $-8,131,338 Selling, general, and administrative expenses $-998,878 $-980,620 Depreciation $-1,497,580 $-1,472,740 EBIT $3,200,948 $2,982,853 Interest expense $-376,634 $-354,060 Taxes $-1,073,239 $-998,941 Net income $1,751,075 $1,629,852 Right-click on the table and select Copy to Clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its…arrow_forwardThe financial statements for Tyler Toys, Inc. are shown in the popup window: LOADING... . Calculate the profit margin, return on assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,147,690 $13,566,481 Cost of goods sold $-8,447,054 $-8,131,319 Selling, general, and administrative expenses $-998,405 $-981,658 Depreciation $-1,498,619 $-1,472,478 EBIT $3,203,612 $2,981,026 Interest expense $-376,184 $-355,975 Taxes $-1,074,423 $-997,519 Net income $1,753,005 $1,627,532 Right-click on the table and select Copy to Clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its…arrow_forwardFor fiscal year 2018, Walmart Inc. (WMT) had total revenues of $500.34 billion, net income of $9.86 billion, total assets of $204.52 billion, and total shareholders' equity of $77.87 billion. a. Calculate Walmart's ROE directly, and using the DuPont Identity. b. Comparing with the data for Costco, use the DuPont Identity to understand the difference between the two firms' ROES. Data table For fiscal year 2018, Costco Wholesale Corporation (COST) had a net profit margin of 2.08%, asset turnover of 3.55, and a book equity multiplier of 3.37. Costco's ROE (DuPont) is 24.88%.arrow_forward
- Calculate the Current Ratio, Debt Ratio, Return on Assets (ROA) and Return on Equity (ROE). For the ROA and ROE, you should use the average total assets and the average total equity in your calculations. (The average is the total across two years divided by two). Calculate these values for each of 2011-2014. Interpret your calculations: what does this information mean? How is the company doing?arrow_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_forwardCompute the following ratios for 2025 and 2024. a. Currentratio b. Inventory turnover. (Inventory on December 31,2023 , was$400.) c. Profit margin. d. Return on assets. (Assets on December 31, 2023, were$2,300.) e. Return on common stockholders' equity. (Stockholders' equity-common on December 31,2023, was$950.) f. Debt to assets ratio. g. Times interest earned.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License