Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
expand_more
expand_more
format_list_bulleted
Question
Chapter 10, Problem 27EA
1.
To determine
Compute the debt-to equity ratio and interpret the ratio.
2.
To determine
Compute the return on assets and interpret the ratio.
3.
To determine
Compute the return on equity and interpret the ratio.
4.
To determine
Compute the gross margin percentage and interpret the ratio.
5.
To determine
Compute the profit margin percentage and interpret the ratio.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Solve and perform the different financial ratios using the financial statements of XYZ Company for the year 2021.
1. Current Ratio
2. Quick Ratio
3. Receivables Turnover
4. Inventory Turnover
5. Debt Ratio
6. Equity Ratio
7. Times Interest Earned
8. Gross Profit Margin
9. Operating Profit Margin
10. Net Profit Margin
5. Profitability ratios
Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the
operating performance of a firm.
Your boss has asked you to calculate the profitability ratios of Diusitech Inc. and make comments on its second-year performance as compared with its
first-year performance.
The following shows Diusitech Inc.'s income statement for the last two years. The company had assets of $4,700 million in the first year and $7,518
million in the second year. Common equity was equal to $2,500 million in the first year, and the company distributed 100% of its earnings out as
dividends during the first and the second years. In addition, the firm did not issue new stock during either year.
Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars)
Year 2 Year 1
2,540
2,000
1,610
1,495
127
80
1,737
803
80
723
181
542
Net Sales
Operating costs except depreciation and…
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 10 Solutions
Financial Accounting
Ch. 10 - Prob. 1YTCh. 10 - Prob. 2YTCh. 10 - Prob. 3YTCh. 10 - Prob. 4YTCh. 10 - Prob. 5YTCh. 10 - Define the items that the Financial Accounting...Ch. 10 - Prob. 2QCh. 10 - Prob. 3QCh. 10 - Prob. 4QCh. 10 - Prob. 5Q
Ch. 10 - Prob. 6QCh. 10 - What is solvency? Which ratios are useful for...Ch. 10 - What is profitability? Which ratios are useful for...Ch. 10 - What are market indicators? Which ratios are...Ch. 10 - Prob. 10QCh. 10 - Prob. 1MCQCh. 10 - Current assets for Kearney Company are 120,000 and...Ch. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Prob. 7MCQCh. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQCh. 10 - Prob. 1SEACh. 10 - Prob. 2SEACh. 10 - Prob. 3SEACh. 10 - Prob. 4SEACh. 10 - Prob. 5SEACh. 10 - A five-year comparative analysis of Low Light...Ch. 10 - Prob. 7SEACh. 10 - Prob. 8SEBCh. 10 - Prob. 9SEBCh. 10 - Prob. 10SEBCh. 10 - Perform a vertical analysis on the following...Ch. 10 - Prob. 12SEBCh. 10 - Prob. 13SEBCh. 10 - Use the following information to construct a...Ch. 10 - Prob. 16EACh. 10 - Prob. 17EACh. 10 - Prob. 18EACh. 10 - Prob. 19EACh. 10 - Use the balance sheets from Suzannes Hotels in...Ch. 10 - Prob. 21EACh. 10 - Prob. 22EACh. 10 - Prob. 23EACh. 10 - Use the statements of earnings for Campbell Soup...Ch. 10 - Prob. 25EACh. 10 - Prob. 26EACh. 10 - Prob. 27EACh. 10 - Prob. 28EBCh. 10 - Prob. 29EBCh. 10 - Prob. 30EBCh. 10 - Prob. 31EBCh. 10 - Prob. 32EBCh. 10 - Prob. 33EBCh. 10 - Prob. 34EBCh. 10 - Prob. 35EBCh. 10 - Prob. 36EBCh. 10 - Prob. 37EBCh. 10 - Prob. 38EBCh. 10 - Prob. 39EBCh. 10 - Prob. 40EBCh. 10 - Prob. 41PACh. 10 - Prob. 42PACh. 10 - Prob. 43PACh. 10 - Following are the income statements for Alpha...Ch. 10 - Prob. 45PACh. 10 - Prob. 46PACh. 10 - Prob. 47PACh. 10 - You are interested in investing in Teddy Company,...Ch. 10 - Prob. 49PBCh. 10 - Prob. 50PBCh. 10 - Prob. 51PBCh. 10 - Prob. 52PBCh. 10 - Prob. 53PBCh. 10 - Prob. 54PBCh. 10 - Prob. 55PBCh. 10 - Prob. 56PBCh. 10 - Prob. 1CTPCh. 10 - Prob. 2CTP
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
- Which of the following ratios is used to measure a firms profitability? a. Liabilities Ă· Equity c. Sales Ă· Assets b. Assets Ă· Equity d. Net Income Ă· Net Salesarrow_forwardANALY SIS OF PROFITABILITY Based on the financial statement data in Exercise 24-1A, compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) Profit margin ratio (b) Return on assets (c) Return on common stockholders equity (d) Earnings per share of common stockarrow_forwardThe average liabilities, average stockholders' equity, and average total assets are as follows: 1. Determine the following ratios for both companies, rounding ratios and percentagesto one decimal place: a. Return on total assets b. Return on stockholders' equity c. Times interest earned d. Ratio of total liabilities to stockholders' equity 2. Based on the information in (1), analyze and compare the two companies'solvency and profitability. Comprehensive profitability and solvency analysis Marriott International, Inc., and Hyatt Hotels Corporation are two major owners and managers of lodging and resort properties in the United States. Abstracted income statement information for the two companies is as follows for a recent year (in millions): Balance sheet information is as follows:arrow_forward
- Define each of the following terms: Liquidity ratios: current ratio; quick, or acid test, ratio Asset management ratios: inventory turnover ratio; days sales outstanding (DSO); fixed assets turnover ratio; total assets turnover ratio Financial leverage ratios: debt ratio; times-interest-earned (TIE) ratio; EBITDA coverage ratio Profitability ratios: profit margin on sales; basic earning power (BEP) ratio; return on total assets (ROA); return on common equity (ROE) Market value ratios: price/earnings (P/E) ratio; price/cash flow ratio; market/book (M/B) ratio; book value per share Trend analysis; comparative ratio analysis; benchmarking DuPont equation; window dressing; seasonal effects on ratiosarrow_forwardYou 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: (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…arrow_forward
- Instructions Using the financial statements and additional information, compute the following ratios for the El Camino Company for 2021. Show all computations. Computations 1. Current ratio 2. Return on common stockholders' equity 3. Price-earnings ratio 4. Inventory turnover 5. Accounts receivable turnover 6. Times interest earned 7. Profit margin 8. Days in inventory 9. Payout ratio 10. Return on assetsarrow_forwardCalculate the following ratios: Return on capital employed Current ratio Liquid ratio Return on Equity Gross Profit & Net Profit Margin Give a brief report on the financial position of the company based on the above figures.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_forward
- 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…arrow_forwardWhich of the following ratios helps in measuring the long term solvency of the company? Current ratio Debt equity ratio Net profit margin ratio Quick ratioarrow_forward- Please refer to the following Income Statement and Balance Sheet (see attached picture): Prepare a vertical analysis for both the income statement and balance sheet. Write a paragraph comparing the company’s performance with the industry average. Compute the following ratios and comment on what the results mean when evaluating the company: Current ratio Gross profit percentage ratio Debt ratio Profit margin ratioarrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Financial Accounting
Accounting
ISBN:9781337272124
Author:Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:Cengage Learning
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License