Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 4, Problem 2BAIC
Walmart and Carrefour follow similar strategies. Walmart consistently outperforms Carrefour on
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The customer-profitability analysis for Patio Grill Company, which is displayed in Exhibit 5–14, ranks customers by operating income. An alternative, often-used approach is to rank customers by sales revenue.Required:1. List the customer numbers in the left-hand column of Exhibit 5–14 by sales revenue, from highest to lowest. Is the ranking different from that in Exhibit 5–14?2. Patio Grill Company’s smallest customers, in terms of sales revenue, are last in the listing prepared for requirement (1). Are these customers the company’s least profitable?3. Would the customer-profitability profile in Exhibit 5–15 be different if the customers were ranked by sales revenue instead of operating income? Explain.4. What factors could cause a larger customer (in terms of sales revenue) to be less profitable than a smaller customer?
Like many technology companies, TechnoTools operates in an environment of decliningprices. Its reported profits will tend to be highest if it accounts for inventory using the:A. FIFO method.B. LIFO method.C. weighted average cost method.
Two days ago, Josh analyzed two gigantic home improvement retailers – The Home Depot, Inc. (HD) and Lowe’s Companies, Inc. (LOW) – and found that HD and LOW have the same quick ratio, but HD has a greater current ratio than LOW. Based on the information, Josh concluded that
A.
HD has a higher receivables turnover ratio.
B.
LOW has lower payables.
C.
HD has greater inventory.
D.
None of the above.
Chapter 4 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 4 - Common-Size Analysis. Common-size analysis is a...Ch. 4 - Earnings per Share. Firm A reports an increase in...Ch. 4 - Prob. 3QECh. 4 - Profit Margin for ROA versus ROCE. Describe the...Ch. 4 - Concept and Measurement of Financial Leverage....Ch. 4 - Advantages of Financial Leverage. A company...Ch. 4 - Prob. 7QECh. 4 - Nucor, a steel manufacturer, reported net income...Ch. 4 - Phillips-Van Heusen, an apparel manufacturer,...Ch. 4 - TJX, Inc., an apparel retailer, reported net...
Ch. 4 - Boston Scientific, a medical device manufacturer,...Ch. 4 - Valero Energy, a petroleum company, reported net...Ch. 4 - Exhibit 4.22 presents selected operating data for...Ch. 4 - Microsoft Corporation (Microsoft) and Oracle...Ch. 4 - Prob. 17PCCh. 4 - Prob. 18PCCh. 4 - Texas Instruments (TI) designs and manufactures...Ch. 4 - JCPenney operates a chain of retail department...Ch. 4 - Prob. 21PCCh. 4 - Selected data for General Mills for 2007, 2008,...Ch. 4 - Prob. 23PCCh. 4 - Hasbro is a leading firm in the toy, game, and...Ch. 4 - Fitch sells casual apparel and personal care...Ch. 4 - Prob. 26PCCh. 4 - Starwood Hotels (Starwood) owns and operates many...Ch. 4 - Select data for Avis and Hertz for 2012 follow....Ch. 4 - Integrative Case 1.1 introduced the industry...Ch. 4 - Prob. 1ABICCh. 4 - Prob. 1ACICCh. 4 - Prob. 1BAICCh. 4 - Prob. 1BBICCh. 4 - Walmart and Carrefour follow similar strategies....Ch. 4 - Walmart and Carrefour follow similar strategies....
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- Basic Inc., a chain of gasoline service stations, has a strategy of charging discount prices for its gasoline by providing very little service and charging relatively high prices for the goods in its attached mini-market. Its balanced scorecard performance measures include: Increase in operating income through cost reduction (Financial); market share in the overall gasoline market (Customer); wait-time at the pump (Internal Business Processes); and store manager and employee bonus based on number of customers served (Learning and Growth). Indicate whether each of these performance measures is appropriate, given Basics strategy.arrow_forwardChoose the best answer for each of the following multiple-choice questions.1. Cost-volume-profit analysis includes some simplifying assumptions. Which of thefollowing is not one of these assumptions?a. Cost and revenues are predictable.b. Cost and revenues are linear over the relevant range.c. Changes in beginning and ending inventory levels are insignificant in amount.d. Sales mix changes are irrelevant. 2. The term relevant range, as used in cost accounting, means the rangea. over which costs may fluctuateb. over which cost relationships are validc. of probable productiond. over which production has occurred in the past 10 years3. How would the following be used in calculating the number of units that must besold to earn a targeted operating income? Price per unit Targeted operating income Denominator Numerator Numerator Numerator Not used Denominator Numerator Denominator 4. Information concerning Korian Corporation’s product is as follows: Sales $300,000 Variable…arrow_forwardAPPLY THE CONCEPTS: Target income (sales revenue) Another useful method for figuring out the type of performance your company will need to reach a target income is by using sales revenue. Rather than using the number of units, this method uses total sales revenue. In companies for which the total set of goods produced and sold is more varied, this would be the preferred method, as opposed to a business in which only one product is sold. Assume a company has pricing and cost information as follows: Price and Cost Information Amount Selling Price per Unit $30 Variable Cost per Unit $15 Total Fixed Cost $15,000 For the upcoming period, the company wishes to generate operating income of $40,000. Given the cost and pricing structure for the company’s product, how much sales revenue must it generate to attain its target income? Step 1: Calculate the contribution margin ratio: The contribution margin ratio is the contribution margin in proportion to the selling price on a…arrow_forward
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- Exhibit 6 Key Competitors and Inditex, 2001 Gap H&M Benetton Inditex Operating Results (€ Millions) Net Operating Revenues 15,559 10,904 2,098 1,189 909 4,269 3,250 Cost of Goods Sold 2,064 2,204 1,615 1,563 1,687 982 Gross Margin Operating Expenses Operating Profits Non-operating Expenses Pre-tax Income 4,656 4,276 379 624 589 286 704 108 -28 43 209 272 617 243 495 Income Tax 280 206 92 150 Minority Interests Net Income -9 410 148 340 Financial Position (€ Millions, except where noted otherwise) Current Assets 3,436 4,695 1,468 1,558 854 Property, Plant, and Equipment Other Noncurrent Assets 661 720 1,228 523 435 54 543 Total Assets 8,566 2,320 2,850 5,170 2,183 2,821 956 2,605 834 285 1,119 Current Liabilities 432 Noncurrent Liabilities 101 625 Total Liabilities 532* 1,580 Equity--Book Value Equity--Market Value" One Year Change in Market Value (%) 3,396 12,687 -60% 1,650 15,564 1,241 2,605 1,486 13,433 47% 8% -20% Other Statistics Employees Number of Countries of Operation Sales in…arrow_forwardTo help in the analysis, Kaylin gathered the following data for LLHC for 20X1: Tons sold: 10 Average cartons per shipment: 2 Average shipments per ton: 7 1) Comment on Ryan’s proposal to drop some high-volume products and place more emphasis on low-volume products. Discuss the role of the accounting system in supporting this type of decision-making.arrow_forwardIdentify which standard of comparison, (a) intracompany, (b) competitor, (c) industry, or (d) guidelines,best describes each of the following examples. Compare McDonald’s profit margin to the fast-food industry profit margin.arrow_forward
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