Managerial Accounting
6th Edition
ISBN: 9781259726972
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 1, Problem 4MCQ
What is Ella Company’s debt ratio?
a. 25.78%
b. 100.00%
c. 74.22%
d. 137.78%
e. 34.74%
Use the following information for question 2 through 5.
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5. Know the calculations for all of the following ratios (see ratio sheet that can be used on the
exam) and know the category (listed in Question 4) they fall in:
Formula
Category/Use
Ratio
Working Capital
Current Assets - Current
Liabilities
Net credit sales/Average
Accounts Receivable
Turnover
accounts receivable
Asset Turnover
Net sales/Average total
assets
Net income/Average total
stockholders' equity
Total liabilities/Total
stockholders equity
Net income/Net sales
Return on Equity (ROE)
Debt to equity
Return on Sales (ROS) (also
known as Net Margin
Current Assets/Current
Liabilities
Cost of goods sold/Average
inventory
Quick assets/Current
Current Ratio
Inventory Turnover
Quick Ratio
liabilities
Dividend Yield
Dividends per share/Market
price per share
Net earnings available for
common stock/Number of
outstanding common shares
Net income/Average total
Earnings per Share (EPS)
Return on Investment (ROI)
assets
Price Earnings Ratio (P/E)
Market price per
share/Earnings per share…
STEP 3: Solve
Calculating the four benchmark financial ratios found in Table 15.3, we get the following:
Ratio with
Ratio
Existing Common Stock with Debt
Financing
Ratio
Formula
Ratio
Financing
Debt ratio
Total Liabilities
35.2%
26.4%
51.5%
Total Assets
Interest-bearing
Interest-Bearing Debt
20.1
15.1
40.2
debt ratio
Total Assets
Times interest
Net Operating Income or EBIT
27.08
31.25
11.72
earned
Interest Expense
Depreciation Amortization
6.84
8.20
3.08
EBITDA
Earnings Before
coverage ratio
Interest and Taxes
Expense
Expense
Principal Payments
Interest Expense + (-
1
Tax Rate
STEP 4: Analyze
Whether the entire $10 million is raised by issuing equity or by borrowing has a dramatic effect on the firm's
capital structure. For example, the debt ratio will either drop from 35.2 percent to 26.4 percent if equity is used or
increase to 51.5 percent if debt is used. The interest-bearing debt ratio will change in a similar manner, dropping
from 20.1 percent to 15.1 percent if equity financing…
Select 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 rations
Chapter 1 Solutions
Managerial Accounting
Ch. 1 - Prob. 1MCQCh. 1 - What is Ella Company’s current ratio? a.0.69...Ch. 1 - What is Ella Company’s acid-test ratio? a.2.39...Ch. 1 - What is Ella Company’s debt ratio? a. 25.78% b....Ch. 1 - What is Ella Company’s equity ratio? a.25.78%...Ch. 1 - Describe the managerial accountant’s role in...Ch. 1 - Distinguish between managerial and financial...Ch. 1 - Prob. 3DQCh. 1 - Prob. 4DQCh. 1 - Distinguish between (a) factory overhead and (b)...
Ch. 1 - Prob. 6DQCh. 1 - What product cost is both a prime cost and a...Ch. 1 - APPLE Assume that we tour Apple’s factory where it...Ch. 1 - Prob. 9DQCh. 1 - Prob. 10DQCh. 1 - Prob. 11DQCh. 1 - Prob. 12DQCh. 1 - Prob. 13DQCh. 1 - Prob. 14DQCh. 1 - Prob. 15DQCh. 1 - Prob. 16DQCh. 1 - Prob. 17DQCh. 1 - What are the three categories of manufacturing...Ch. 1 - List several examples of factory overhead.Ch. 1 - Prob. 20DQCh. 1 - GOOGLE Prepare a proper title for the annual...Ch. 1 - Prob. 22DQCh. 1 - Prob. 23DQCh. 1 - Prob. 24DQCh. 1 - Prob. 25DQCh. 1 - Prob. 1QSCh. 1 - Prob. 2QSCh. 1 - Fixed and variable costs C2 Listed below are...Ch. 1 - QS 14-4 Direct and indirect costs C2
Diez Company...Ch. 1 - Classifying product costs C2 Identify each of the...Ch. 1 - QS 14-6 Product and period costs C3
Identify each...Ch. 1 - Prob. 7QSCh. 1 - Prob. 8QSCh. 1 - Prob. 9QSCh. 1 - Prob. 10QSCh. 1 - Prob. 11QSCh. 1 - Prob. 12QSCh. 1 - Prob. 13QSCh. 1 - Prob. 14QSCh. 1 - Prob. 15QSCh. 1 - Prob. 16QSCh. 1 - Raw materials inventory management A1 Nestlé...Ch. 1 - Exercise 14-1 Sources of accounting information C1...Ch. 1 - Prob. 2ECh. 1 - Exercise 14-3 Cost classifications for a service...Ch. 1 - Exercise 14-4 Cost classifications for a service...Ch. 1 - Prob. 5ECh. 1 - Prob. 6ECh. 1 - Prob. 7ECh. 1 - Prob. 8ECh. 1 - Exercise 14-9 Preparing financial statements for a...Ch. 1 - Prob. 10ECh. 1 - Prob. 11ECh. 1 - Prob. 12ECh. 1 - Prob. 13ECh. 1 - Prob. 14ECh. 1 - Prob. 15ECh. 1 - Prob. 16ECh. 1 - Exercise 14-17 Lean business practice C6 Many...Ch. 1 - Prob. 18ECh. 1 - Prob. 19ECh. 1 - Prob. 1PSACh. 1 - Prob. 2PSACh. 1 - Prob. 3PSACh. 1 - Prob. 4PSACh. 1 - Prob. 5PSACh. 1 - Prob. 1PSBCh. 1 - Prob. 2PSBCh. 1 - Problem 14-3B Schedule of cost of goods...Ch. 1 - Problem 14-4B Ending inventory computation and...Ch. 1 - Prob. 5PSBCh. 1 - Prob. 1SPCh. 1 - Prob. 1AACh. 1 - Both Apple and Google (Alphabet) invest in...Ch. 1 - Samsung’s 2017 annual report discloses the...Ch. 1 - Prob. 1BTNCh. 1 - Prob. 2BTNCh. 1 - Prob. 3BTNCh. 1 - Prob. 4BTNCh. 1 - Prob. 5BTNCh. 1 - Prob. 6BTN
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