Financial Accounting: Tools for Business Decision Making, 8th Edition
8th Edition
ISBN: 9781118953808
Author: Paul D. Kimmel, Jerry J. Weygandt, Donald E. Kieso
Publisher: WILEY
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Question
Chapter 2, Problem 2.2EYCT
(a)
To determine
Formula of working capital:
Formula of current ratio:
Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.
Formula of debt to assets ratio:
Formula of free cash flow:
To compute: (1) Working capital, (2) Current ratio (3) Debt to assets ratio, (4) Free cash flow of Company CS and Corporation V for 2014
(b)
To determine
To analyze: The liquidity and solvency position of two companies based on the computed ratios
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REQUIRED
Use the information provided below to calculate the ratios for 2021 (expressed to two decimal places) that would reflect each of the following:
The time taken by the company to settle its debts with trade suppliers
The amount of debt that the company uses to finance its assets
The operational effectiveness of the company before considering interest income,interest expense and company tax.
What investors are willing to pay for the shares of the company with due considerationgiven to the profit generated by each share in the company.
Comment on the FIVE (5) ratios of Oslo Limited as compared to the industry average
provided in the additional information.
INFORMATION
The information given below was extracted from the books of Oslo Limited:
OSLO LIMITED
STATEMENT OF COMPREHENSIVE…
Threads Limited manufactures nuts and bolts, which are sold to industrial users. The abbreviated financial statements for 2018 and 2019 are as follows:
See images
Dividends were paid on ordinary shares of £70,000 and £72,000 for 2018 and 2019, respectively.
Required:
(a) Calculate the following financial ratios for both 2018 and 2019 (using year-end figures for statement of financial position items):
1 return on capital employed
2 operating profifit margin
3 gross profifit margin
4 current ratio
5 acid test ratio
6 settlement period for trade receivables
7 settlement period for trade payables
8 inventories turnover period.
(b) Comment on the performance of Threads Limited from the viewpoint of a business considering supplying a substantial amount of goods to Threads Limited on usual trade credit terms.
Required:a. Calculate the following ratios for Sweets plc for 2021 and 2020, showing the formulas and workings:1- ROCE2- ROE3- Earnings per share4- Net profit margin5- Asset turnover6- Stock holding days7- Debtors collection period8- Current ratio9- Gearing ratio10- Interest cover
Chapter 2 Solutions
Financial Accounting: Tools for Business Decision Making, 8th Edition
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