Managerial Accounting (5th Edition)
5th Edition
ISBN: 9780134128528
Author: Karen W. Braun, Wendy M. Tietz
Publisher: PEARSON
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Textbook Question
Chapter 14, Problem 14.45ACT
Discussion & Questions
- 1. Describe horizontal analysis. Describe vertical analysis. What is each technique used for? How are the two methods similar? How are they different?
- 2. How is the
current ratio calculated? What is it used to measure? How is it interpreted? - 3. Assume a company has a current ratio of 2.0. List two examples of transactions that could cause the current ratio to increase. Also list two examples of transactions that could cause the current ratio to decrease.
- 4. What does the
accounts receivable turnover measure? What does a relatively high accounts receivable turnover indicate about a company? - 5. Describe the set of circumstances that could result in net income increasing while
return on investment (ROI) decreases. - 6. Suppose a company has a relatively high inventory turnover What does the high inventory turnover indicate about the company s short-term liquidity?
- 7. Describe at least four financial conditions that may signal financial trouble.
- 8. Describe at least two reasons that a company’s ratios might not be comparable overtime.
- 9. Compare and contrast the current ratio and the quick ratio.
- 10. Describe why book value per share of common stock may not be useful for investment analysis.
- 11. Find a recent annual report for a publicly held company in which you are interested. Summarize what sustainability information is provided in that annual report. Based on the sustainability information provided in the annual report, what measurements do you think the company might use to track its sustainability efforts? (You can use your imagination here; the actual sustainability measures are unlikely to be in the annual report.)
- 12. There are three components in the triple bottom line; people, planet, and profit. Which component do you think is most important? Why?
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II. Direction: Solve the following problems using horizontal and vertical analysis. Write the answer on
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Critically Discuss the two statements below.
A. Ratio is an expression of relationship between two or more items in mathematical terms. Ratio may be expressed as a:b (a is to b), in terms of simple fraction, integer, or percentage.
B. A Finance Manager can utilize financial ratios and completely analyse any firm's financial performance without the need for any further financial review via any other company's data.
How do I set this up? This is a few questions stuck together. Count as multiple questions I think.
4-12 Indicate the effect of the transactions listed in the following table on total current assets, current ration, and net income. Use (+) to indicate an increase, (-) to indicate a decrease, and (0) to indicate either no effect or an indeterminate effect. Be prepared to state any necessary assumptions and assume an initial current ratio of more than 1.0.
Table for 4-12
Total Current Assets
Current Ratio
Effect on Net Income
a
Cash is acquired through issuance of additional stock.
b
Merchandise is sold for cash.
c
Federal income tax due for the previous year is paid.
d
A fixed asset is sold for less than book value.
e
A fixed asset is sold for more than book value.
f
Merchandise is sold on credit.
g
Payment is made to…
Chapter 14 Solutions
Managerial Accounting (5th Edition)
Ch. 14 - (Learning Objective 1) Which of the following...Ch. 14 - Prob. 2QCCh. 14 - Prob. 3QCCh. 14 - Prob. 4QCCh. 14 - (Learning Objective 3) Which of the following is...Ch. 14 - (Learning Objective 4) Working capital is defined...Ch. 14 - Prob. 7QCCh. 14 - Prob. 8QCCh. 14 - Prob. 9QCCh. 14 - Prob. 10QC
Ch. 14 - Prob. 14.1SECh. 14 - Find trend percentages (Learning Objective 1)...Ch. 14 - Prob. 14.3SECh. 14 - Prepare common-size income statements (Learning...Ch. 14 - Analyze common-size income statements (Learning...Ch. 14 - Cartwrights Data Set used for S14-6 through...Ch. 14 - Cartwrights Data Set used for S14-6 through...Ch. 14 - Cartwrights Data Set used for S14-6 through...Ch. 14 - Prob. 14.9SECh. 14 - Prob. 14.10SECh. 14 - Prob. 14.11SECh. 14 - Prob. 14.12AECh. 14 - Prob. 14.13AECh. 14 - Prob. 14.14AECh. 14 - Prob. 14.15AECh. 14 - Prob. 14.16AECh. 14 - Calculate ratios (Learning Objective 4) Kelleher...Ch. 14 - Prob. 14.18AECh. 14 - Prob. 14.19AECh. 14 - Prob. 14.20AECh. 14 - Prob. 14.21AECh. 14 - Classify company sustainability measurements into...Ch. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Calculate ratios (Learning Objective 4) Ponderosa...Ch. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Prob. 14.31BECh. 14 - Calculate ratios (Learning Objective 4) Thornton...Ch. 14 - Prob. 14.33BECh. 14 - Prob. 14.34APCh. 14 - Comprehensive analysis (Learning Objectives 2, 3, ...Ch. 14 - Prob. 14.36APCh. 14 - Ratio analysis over two years (Learning Objective...Ch. 14 - Prob. 14.38APCh. 14 - Prob. 14.39BPCh. 14 - Prob. 14.40BPCh. 14 - Prob. 14.41BPCh. 14 - Ratio analysis over two years (Learning Objective...Ch. 14 - Make an investment decision (Learning Objective 4)...Ch. 14 - Prob. 14.44SCCh. 14 - Discussion Questions 1. Describe horizontal...Ch. 14 - Prob. 14.47ACTCh. 14 - Using financial statement ratios to analyze...
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