Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.19P
Problem 3.19
LO 6
Calculate and analyze liquidity measures Following are the current asset and current liability’ sections of the balance sheets for Freedom, Inc., at January 31, 2017 and 2016 (in millions):
| Current Assets | January 31,2017 | January 31,2016 |
| Cash | $15 | $ 6 |
| 9 | 14 | |
| Inventories | 18 | 24 |
| Total current assets $42 Current Liabilities | $44 | |
| Note payable | $ 9 | $ 9 |
| Accounts payable | 15 | 5 |
| Other accrued liabilities |
6
Required:
- Calculate the
working capital andcurrent ratio at eachbalance sheet date. Round your current ratio answers to one decimal place. - Evaluate the firm’s liquidity at each balance sheet date.
- Assume that the firm operated at a loss during the year ended January 31, 2017. How could cash have increased during the year?
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the nearest percent.
Which company has the most seasonal business? Briefly explain.
Which company is Toys "R" Us? The Gillette Company? Briefly explain.
c.
d.
SERIAL PROBLEM:KATE'S CARDS
Kate is very pleased with the results of the first year of operations for Kate's Cards. She ended the
year on a high note, with the company's reputation for producing quality cards leading to more basi-
ness than she can currently manage. Kate is considering expanding and bringing in several employ-
ees. In order to do this, she will need to find a larger location and also purchase more equipment. All
this means additional financing. Kate has asked you to look at her year-end financial statements as if
you were a banker considering giving Kate a loan. Comment on your findings and provide calcula-
tions to support your comments.
(Note: This is a continuation of the Serial Problem: Kate's Cards from Chapter 1 through Chapter 12.)
SP13.
KATE'S CARDS
Income Statement
Year Ended August 31, 2019
$185,000…
14 BALANCE SHEET
15 ASSETS
16 Cash and marketable securities
17 Accounts receivable
O 0.27
O 1.37
A
3.68
18 Inventory
19 Current assets
20 Land, buildings, plant, and equipment
21 Accumulated depreciation
22 Net fixed assets
23 Total assets
24 LIABILITIES AND EQUITIES
25 Short-term bank loans
26 Accounts payable
27 Accruals
28 Current liabilities
29 Long-term debt
30 Common stock
31 Retained earnings
32 Total equity
33 Total liabilities and equity
34 Current Ratio
Based on the balance sheet shown above, what is the current ratio at C34 cell for the current ratio in 2015?
Onone of the answers is correct.
3.16
B
2016
C
2015
$37,974 $154,550
10,000
6,000
250,000 135,000
$297,974 $295,550
$250,000 $125,000
50,000 25,000
$200,000 $100,000
$497,974 $395,550
$70,000 $72,500
9,999
5,253
3,666
2,550
$83,665 $80,303
$233,500 $135,500
$160,000 $160,000
20,810 19,747
$180,810 $179,747
$497,974 $395,550
?
Problem 5
Jill Corporation's sales, current assets, and current liabilities have been reported
as follows over the last five years (amounts in thousands):
2019
2018
2017
2016
2015
P10,800
2,626
Sales
P8,000
P9,200
2,220
P9,600
P8,640
Current assets
2,181
2,267
2,225
Current liabilities
475
450
350
325
250
Required: Express all the sales, current assets, and current liabilities on trend index.
Round your decimals up to 2 places.
a. Use 2015 as your base year.
b. Use 2019 as your base year.
Chapter 3 Solutions
Accounting: What the Numbers Mean
Ch. 3 - Prob. 3.1MECh. 3 - Mini-Exercise 3.2 LO 3 ROI analysis using the...Ch. 3 - Mini-Exercise 3.3 LO 4 Calculate ROE Firm L had...Ch. 3 - Prob. 3.4MECh. 3 - Mini-Exercise 3.5 LO 6 Calculate current...Ch. 3 - Mini-Exercise 3.6 LO 6 Calculate working capital...Ch. 3 - Exercise 3.7 LO 2 Compare investment alternatives...Ch. 3 - Prob. 3.8ECh. 3 - Exercise 3.9 LO 2 Compare investment alternatives...Ch. 3 - Exercise 3.10 LO 2 Compare investment alternatives...
Ch. 3 - Exercise 3.11 LO 3 ROI analysis using the DuPont...Ch. 3 - Prob. 3.12ECh. 3 - Prob. 3.13ECh. 3 - Prob. 3.14ECh. 3 - Exercise 3.15 LO 6 Effect of transactions on...Ch. 3 - Exercise 3.16 LO 6 Effect of transactions on...Ch. 3 - Calculate profitability measures using annual...Ch. 3 - Prob. 3.18PCh. 3 - Problem 3.19 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.20 LO 6 Calculate and analyze liquidity...Ch. 3 - Problem 3.21 LO 3 Applications of ROI using the...Ch. 3 - Prob. 3.22PCh. 3 - Case 3.23 LO 3. 4, 6, 2 Focus company-analysis of...Ch. 3 - Case 3.24 LO 3, 4, 6, 7 Analysis of liquidity' and...
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