Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Chapter 14, Problem 14.2DI
(a) Current ratio
To determine
Inventory Turnover: It is a part of efficiency ratios used during the process of ratio analysis. It reflects the number of times a company’s inventory is converted into sale during a particular period. The cost of goods sold is divided by average inventory to get the value of inventory turnover.
Profit Margin: Profit margin reflects the portion of net income in the net sales. It is a profitability measure tool that is used to evaluate the net income a business earns on every dollar of net sales. It is computed as net income divided by net revenue.
Return on Total Assets: It is a measure to evaluate the efficiency of company’s assets. It reports the profit earned as the percentage of total assets used in the business. A company’s
The rate of Return on Common
Debt to Assets Ratio: It is the ratio between total assets of the company and the total liabilities. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.
Times Interest Earned Ratio: It’s a measure to evaluate the net income for interest payment on the debt of a company. It is a part of solvency ratios.
To compute: Current ratio for 2016 and 2017.
(b)
To determine
To compute: Inventory turnover
(c)
To determine
To compute: Profit margin
(d)
To determine
To compute: Return on assets
(e)
To determine
To compute: Return on common stockholder’s equity
(f)
To determine
To compute: Debt to assets ratio
(g)
To determine
To compute: Times interest earned
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The condensed financial statements of Underwood Company for the years 2017 and 2018 are presented as follows. (Amounts in thousands.)
UNDERWOOD COMPANYBalance SheetsDecember 31
2018
2017
Current assets
Cash and cash equivalents
$330
$360
Accounts receivable (net)
470
400
Inventory
460
390
Prepaid expenses
120
160
Total current assets
1,380
1,310
Investments
10
10
Property, plant, and equipment
420
380
Intangibles and other assets
530
510
Total assets
$2,340
$2,210
Current liabilities
$900
$790
Long-term liabilities
410
380
Stockholders’ equity—common
1,030
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Total liabilities and stockholders’ equity
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2017
Sales revenue
$3,800
$3,460
Costs and expenses
Cost of goods sold
955
890
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The condensed financial statements of Ivanhoe Company for the years 2016 and 2017 are presented as follows. (Amounts in thousands.)
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IVANHOE COMPANYIncome StatementsFor the Year Ended December 3120172016Sales revenue$3,870$3,530Costs and expenses Cost of goods sold1,1251,060 Selling & administrative expenses2,4002,330 Interest expense2520 Total costs and expenses3,5503,410Income before income taxes320120Income tax expense9636Net income$ 224$ 84
Compute the following ratios for 2017 and 2016.…
Chapter 14 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 14 - (a) Jose Ramirez believes that the analysis of...Ch. 14 - (a) Distinguish among the following bases of...Ch. 14 - Prob. 3QCh. 14 - Prob. 4QCh. 14 - Prob. 5QCh. 14 - Prob. 6QCh. 14 - Prob. 7QCh. 14 - What do the following classes of ratios measure?...Ch. 14 - What is the difference between the current ratio...Ch. 14 - Hizar Company, a retail store, has an accounts...
Ch. 14 - Which ratios should be used to help answer the...Ch. 14 - The price-earnings ratio of General Motors...Ch. 14 - What is the formula for computing the payout...Ch. 14 - Holding all other factors constant, indicate...Ch. 14 - Prob. 15QCh. 14 - Prob. 16QCh. 14 - Prob. 17QCh. 14 - Prob. 18QCh. 14 - Prob. 19QCh. 14 - Why is it important to report discontinued...Ch. 14 - You are considering investing in Wingert...Ch. 14 - Prob. 22QCh. 14 - Prob. 23QCh. 14 - You recently received a letter from your Uncle...Ch. 14 - Prob. 14.2BECh. 14 - Using the following data from the comparative...Ch. 14 - Using the same data presented above in BE14-3 for...Ch. 14 - Net income was 500,000 in 2016, 450,000 in 2017,...Ch. 14 - Prob. 14.6BECh. 14 - Prob. 14.7BECh. 14 - Prob. 14.8BECh. 14 - Prob. 14.9BECh. 14 - Prob. 14.10BECh. 14 - The following data are taken from the financial...Ch. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - On June 30. Holloway Corporation discontinued its...Ch. 14 - Prob. 14.1DICh. 14 - Prob. 14.2DICh. 14 - In its proposed 2017 income statement. Hrabik...Ch. 14 - Financial information for Kurzen Inc. is presented...Ch. 14 - Operating data for Navarro Corporation are...Ch. 14 - The comparative condensed balance sheets of Gurley...Ch. 14 - The comparative condensed income statements of...Ch. 14 - Suppose Nordstrom, Inc., which operates department...Ch. 14 - Keener Incorporated had the following transactions...Ch. 14 - Frizell Company has the following comparative...Ch. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Wiemers Corporations comparative balance sheets...Ch. 14 - Prob. 14.12ECh. 14 - Prob. 14.13ECh. 14 - Comparative statement data for Farris Company and...Ch. 14 - The comparative statements of Painter Tool Company...Ch. 14 - Prob. 14.3APCh. 14 - Financial information for Messersmith Company is...Ch. 14 - Prob. 14.5APCh. 14 - Prob. 14.6APCh. 14 - Prob. 14.7APCh. 14 - Prob. 14.8APCh. 14 - Prob. 14.9APCh. 14 - Financial Reporting Problem: Apple Inc. Your...Ch. 14 - PepsiCos financial statements are presented at...Ch. 14 - Prob. 14.3BYPCh. 14 - As the CPA for Gandara Manufacturing Inc., you...Ch. 14 - The Management Discussion and Analysis section of...Ch. 14 - Prob. 14.6BYPCh. 14 - Dave Schonhardt, president of Schonhardt...
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