Cornerstones of Financial Accounting - With CengageNow
4th Edition
ISBN: 9781337760959
Author: Rich
Publisher: CENGAGE L
expand_more
expand_more
format_list_bulleted
Question
Chapter 8, Problem 84.4C
To determine
Concept introduction:
Current Ratio is measure of the company’s ability to pay off its current liabilities using its current assets. It is calculated by dividing the total current assets by total current liabilities. The formula of the current ratio is as follows:
To discuss:
The Liquidity position of Under Armour and Columbia Sportswear.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Question 1
Mabel is a potter and sells her pottery at stalls that she rents in four tourist information centres
across the south of England.
Extracts from her financial statements for the years ended 31 December 2021 and 2020 are
shown below.
Statement of profit or loss for the year ended 31 December:
2021
28,900
|(16,500)
12,400
(3,800)
8,600
|(4,000)
4,600
2020
Revenue
27,200
(14,000)
13,200
(3,600)
9,600
Cost of sales
Gross profit
Operating expenses
Operating profit
Non-operating expenses
Net profit
9,600
Statement of financial position as at 31 December:
2021
Non-current assets
Current assets
Total assets
22,660
4,360
27,020
2020
20,920
3,750
24,670
Equity
Non-current liabilities
Current liabilities
Equity and liabilities
20,940
3,000
3,080
27,020
16,340
3,500
4,830
24,670
The following information is also relevant:
In July 2021 the rent on one of Mabel's stalls was increased significantly for the third time in
three years so she decided not to renew the annual contract. She sold…
Compute Liquidity and Solvency Ratios for Competing Firms
Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements.
$ millions
Cash and equivalents
Short-term investments
Accounts receivable
Current assets
Current liabilities
Total liabilities
Total equity
Earnings before interest and tax (EBIT)
Interest expense, gross
a. Compute the following measures for both companies.
Note: Round your final answers to two decimal places (for example, enter 6.78 for 6.77555).
1. Current ratio
2. Quick ratio
3. Times interest earned
4. Liabilities-to-equity
HAL SLB
$2,008 $1,433
1,344
5,077 7,645
11,151 15,731
4,658 13,081
16,438 33,921
9,258 35,488
2,393 2,959
554
537
HAL
2.28 x
1.5 x
4.54 x
1.69 *
SLB
1.114 x
0.79 x
5.79 *
0.91 x
b. Which company appears more liquid? HAL
c. Which company appears more solvent? SLB =
Based on the Balance sheet calculate:
1.Current Ratio 2. Acid Test or Quick Ratio 3. Cash Ratio 4. Debt Ratio 5. Debt to Equity Ratio 6. Asset Turnover Ratio 7. Receivable Turnover Ratio and 8. Day Sales to Inventory Ratio.
Based on the calculations presented above interpret the overall performance of BMW AG Group’s and the line items it must stay focused upon. Discuss its overall financial status having calculated the ratios across the years, considering the impact of Covid-19 while support decision-making related to its future growth and profitability
Chapter 8 Solutions
Cornerstones of Financial Accounting - With CengageNow
Ch. 8 - Prob. 1DQCh. 8 - Prob. 2DQCh. 8 - Prob. 3DQCh. 8 - Prob. 4DQCh. 8 - Prob. 5DQCh. 8 - Prob. 6DQCh. 8 - Prob. 7DQCh. 8 - Prob. 8DQCh. 8 - Prob. 9DQCh. 8 - Prob. 10DQ
Ch. 8 - Prob. 11DQCh. 8 - Prob. 12DQCh. 8 - Prob. 13DQCh. 8 - Prob. 14DQCh. 8 - Prob. 15DQCh. 8 - Prob. 16DQCh. 8 - Prob. 17DQCh. 8 - Prob. 18DQCh. 8 - Prob. 19DQCh. 8 - Prob. 20DQCh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Refer to the information for Kinsella Seed above....Ch. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQCh. 8 - Prob. 9MCQCh. 8 - When a credit is made to federal income taxes...Ch. 8 - Prob. 11MCQCh. 8 - Prob. 12MCQCh. 8 - Prob. 13MCQCh. 8 - Prob. 14MCQCh. 8 - Prob. 15MCQCh. 8 - Prob. 16MCQCh. 8 - Prob. 17MCQCh. 8 - Which of the following transactions would cause...Ch. 8 - Issuing Notes Payable On June 30, Carmean Inc....Ch. 8 - Notes Payable Rogers Machinery Company borrowed...Ch. 8 - Prob. 21CECh. 8 - Accrued Interest On March 1, the Garner...Ch. 8 - Prob. 23CECh. 8 - Prob. 24CECh. 8 - Sales Tax Cobb Baseball Bats sold 45 bats for $50...Ch. 8 - Payroll Taxes Hernandez Builders has a gross...Ch. 8 - Prob. 27CECh. 8 - Prob. 28CECh. 8 - Unearned Sales Revenue Brand Landscaping offers a...Ch. 8 - Prob. 30CECh. 8 - Prob. 31CECh. 8 - Prob. 32CECh. 8 - Liquidity Ratios NWAs financial statements contain...Ch. 8 - Prob. 34CECh. 8 - Accounts Payable On May 18, Stanton Electronics...Ch. 8 - Accounts and Notes Payable On February 15, Barbour...Ch. 8 - Issuing Notes Payable On September 30, Bello...Ch. 8 - Notes Payable Renchen Company, which manufactures...Ch. 8 - Accrued Interest On July 1, Brimley Company issued...Ch. 8 - Accrued Interest On May 1, the Garnett Corporation...Ch. 8 - Accrued Property Taxes Annual property taxes...Ch. 8 - Accrued Income Taxes Nolan Inc. had taxable income...Ch. 8 - Prob. 43BECh. 8 - Accrued Wages A company employs a part-time staff...Ch. 8 - Prob. 45BECh. 8 - Prob. 46BECh. 8 - Prob. 47BECh. 8 - Prob. 48BECh. 8 - Payroll Taxes Sids Grocery Store has 100 employees...Ch. 8 - Prob. 50BECh. 8 - Payroll Taxes Its the Tooth Dental works to...Ch. 8 - Unearned Sales Revenue Curtiss Carpet Cleaning...Ch. 8 - Unearned Rent Revenue Mannion Property Management...Ch. 8 - Contingent Liabilities Many companies provide...Ch. 8 - Prob. 55BECh. 8 - Prob. 56BECh. 8 - Prob. 57BECh. 8 - Liquidity Ratios JRLs financial statements contain...Ch. 8 - Prob. 59BECh. 8 - Prob. 60ECh. 8 - Recording Various Liabilities Glenview Hardware...Ch. 8 - Recording Various Liabilities Plymouth Electronics...Ch. 8 - Reporting Liabilities Morton Electronics had the...Ch. 8 - Accounts Payable Sleek Ride, a company providing...Ch. 8 - Accrued Liabilities Charger Inc. had the following...Ch. 8 - Accrued Liabilities Thornwood Tile had the...Ch. 8 - Prob. 67ECh. 8 - Payroll Accounting and Discussion of Labor Costs...Ch. 8 - Unearned Revenue Jennifers Landscaping Services...Ch. 8 - Prob. 70ECh. 8 - Warranties Eds Athletics sells bicycles and other...Ch. 8 - Ratio Analysis Intel Corporation provided the...Ch. 8 - Payable Transactions Richmond Company engaged in...Ch. 8 - Payroll Accounting Jet Enterprises has the...Ch. 8 - Note Payable and Accrued Interest Fairbome Company...Ch. 8 - Prob. 76APSACh. 8 - Prob. 77APSACh. 8 - Prob. 78APSACh. 8 - Prob. 79APSACh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Payable Transactions Daniels Company engaged in...Ch. 8 - Payroll Accounting McLaughlin Manufacturing has...Ch. 8 - Note Payable and Accrued Interest Ellsworth...Ch. 8 - Prob. 76BPSBCh. 8 - Prob. 77BPSBCh. 8 - Prob. 78BPSBCh. 8 - Prob. 79BPSBCh. 8 - Ratio Analysis Consider the following information...Ch. 8 - Prob. 81.1CCh. 8 - Prob. 81.2CCh. 8 - Prob. 81.3CCh. 8 - Prob. 82.1CCh. 8 - Prob. 82.2CCh. 8 - Prob. 82.3CCh. 8 - Prob. 83.1CCh. 8 - Prob. 83.2CCh. 8 - Prob. 83.3CCh. 8 - Prob. 83.4CCh. 8 - Prob. 83.5CCh. 8 - Prob. 83.6CCh. 8 - Prob. 83.7CCh. 8 - Prob. 83.8CCh. 8 - Prob. 83.9CCh. 8 - Prob. 84.1CCh. 8 - Prob. 84.2CCh. 8 - Prob. 84.3CCh. 8 - Prob. 84.4CCh. 8 - Prob. 84.5CCh. 8 - Comparative Analysis: Under Armour, Inc., versus...Ch. 8 - Prob. 84.7CCh. 8 - Prob. 84.8CCh. 8 - Prob. 85.1CCh. 8 - Prob. 85.2CCh. 8 - Prob. 85.3C
Knowledge Booster
Similar questions
- A Preparation of Ratios Refer to the financial statements for Burch Industries in Problem 12-89A and the following data. Required: 1. Prepare all the financial ratios for Burch for 2019 and 2018 (using percentage terms where appropriate and rounding all answers to two decimal places). 2. CONCEPTUAL CONNECTION Explain whether Burchs short-term liquidity is adequate. 3. CONCEPTUAL CONNECTION Discuss whether Burch uses its assets efficiently. 4. CONCEPTUAL CONNECTION Determine whether Burch is profitable. 5. CONCEPTUAL CONNECTION Discuss whether long-term creditors should regard Burch as a high-risk or a low-risk firm. 6. Perform a Dupont analysis (rounding to two decimal places) for 2018 and 2019.arrow_forwardRatios Analyses: McCormick Refer to the information for McCormick above. Additional information for 20X3 it as follows (amounts in millions): Required: Next Level Compute the following for 20X3. Provide a brief description of what each ratio reveals about McCormick 1. return on common equity 2. debt-to-assets 3. debt-toequity 4. current 5. quick (McCormick uses cash and equivalents, short-term securities and receivables in their quick ratio calculation.) 6. inventory turnover days 7. accounts receivable turnover days 8. accounts payable turnover days 9. operating cycle (in days) 10. total asset turnover Use the following information for 14-17 and 14-18: The Hershey Company is one of the worlds leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hersheys consolidated balance sheets for 20X2 and 20X3 follow.arrow_forwardShort-Term Liquidity Ratios Three ratios calculated for Puckerman, Cohen, and Chang companies for 2018 and 2019 follow. Required: Explain which company appears to be the most liquid.arrow_forward
- Methodology:• Based on the above information the consulting group will conduct ratio analysis for the following ratios:o Current ratio o Receivable’s turnover o Times’s interest earned o Profit margin o Days in inventory o Return on assets o Cash current debt coverage ratio • As a next step the group will compare the ratios calculated above with industry benchmarks. The benchmarks are indicated within brackets besides each ratio.o Current ratio (3 to 1) o Receivable’s turnover (13 times) o Times’s interest earned (9 times) o Profit margin (12%) o Days in inventory (50 days) o Return on assets (12%) o Cash current debt coverage ratio (2 timesarrow_forwardVII. Direction: Compute and interpret. The following comparative financial statements are provided by Avatar Industries. You were asked to compute the different financial ratios and provide your interpretations with regards to profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template below to input your answer and solution. AVATAR INDUSTRIES AVATAR INDUSTRIES Comparative Statement of Financial Position For the years 2019 and 2018 Comparative Income Statement For the years 2019 and 2018 2019 2018 2019 2018 ASSETS Current Assets: Sales P200,000 P210,000 Cash & Cash Equivalent P65,000 P70,000 Sales Returns and Allowances 40,000 25,000 Accounts Receivable 40,000 35,000 Net Sales 160,000 185,000 Marketable Securities 40,000 35,000 Cost of Goods Sold 100,000 115,625 Inventory 100,000 80,000 Gross Profit 60,000 69,375 Total Current Assets 245,000 220,000 Operating Expenses: Fixed Assets 200,000 160,000 Selling Expenses 22,000 25,000 Total Assets P445,000…arrow_forwardVII. Direction: Compute and interpret. The following comparative financial statements are provided by Avatar Industries. You were asked to compute the different financial ratios and provide your interpretations with regards to profitability, efficiency, liquidity and solvency of the company. Use the Answer Sheet template below to input your answer and solution. AVATAR INDUSTRIES AVATAR INDUSTRIES Comparative Statement of Financial Position For the years 2019 and 2018 Comparative Income Statement For the years 2019 and 2018 2019 2018 2019 2018 ASSETS Current Assets: Sales P200,000 P210,000 Cash & Cash Equivalent P65,000 P70,000 Sales Returns and Allowances 40,000 25,000 Accounts Receivable 40,000 35,000 Net Sales 160,000 185,000 Marketable Secuities 40,000 35,000 Cost of Goods Sold 100,000 115,625 Inventory 100,000 80,000 Gross Profit 60,000 69,375 Total Current Assets 220,000 200,000 160,000 P445,000 P380,000 245,000 Operating Expenses: Fixed Assets Selling Expenses 22,000 25,000 Total…arrow_forward
- Margaret O'Flaherty, a portfolio manager for MCF Investments, is considering investing in Alpine Chemical 7% bonds, which mature in 10 years. She asks you to analyze the company to determine the riskiness of the bonds. Alpine Chemical Company Financial Statements Years Ended December 31, ($ in millions) 20X1 20X2 20X3 20X4 20X5 20X6 Assets Cash $ 55 $ 1,637 2,021 190 $ 2,143 1,293 157 249 $ 1,394 1,258 3,493 1,322 Accounts receivable 3,451 1,643 2,087 Inventories 945 Other current assets 17 27 55 393 33 171 5,097 6,181 Current assets 3,114 5,038 2,543 2,495 3,986 5,757 3,138 3,865 2,707 5,619 2,841 2,778 5,265 4,650 2,177 2,473 Gross fixed assets 7,187 3,893 3,465 2,716 Less: Accumulated depreciation Net fixed assets 2,619 3,294 Total assets $6,338 $5,609 $5,485 $6,605 $7,813 $8,559 Liabilities and net worth Notes payable Accounts payable $1,300 338 $ 525 2$ 750 $1,750 $1,900 673 638 681 743 978 Accrued liabilities 303 172 359 359 483 761 Current liabilities 1,501 1,985 1,997 1,457…arrow_forwardes Selected financial data regarding current assets and current liabilities for Princess's Line, a competitor in the cruise line industry, is provided: ($ in millions) Current assets: Cash and cash equivalents Current investments Net receivables Inventory Other current assets Total current assets Current liabilities: Accounts payable Short-term debt Other current liabilities Total current liabilities Current Ratio Required: 1. Calculate the current ratio and the acid-test ratio for Princess's Line. (Enter your answers in millions, not in dollars. For example, $5,500,000 should be entered as 5.5.) Accounts in Ratio Acid-Test Ratio Accounts in Ratio Amounts Amounts 11 $403 82 271 96 125 $977 11 $1,061 644 969 $2,674arrow_forwardRatio Analysis Based on the Income Statement and Balance Sheet, complete the table below. Then comment on the liquidity, profitability, leverage, asset management and market value. Analysis of Financial Data (Table with ratios) Ratio Analysis 2021 Est. 2020 2019 Industry Average Liquidity Ratios Current Ratio (times) 4.2 Quick Ratio (times) 2.1 Asset Management Ratios Average sales/day 9 Inventory Turnover Ratio (times) 9 Days Sales Outstanding (days) 36 Fixed Assets Turnover Ratio (times) 3 Total Asset Turnover Ratio 1.8 Debt Management Ratios Total Debt to Total Assets (%) 40 Times Interest Earned (times) 6 Debt to Equity Ratio (%) 1 Profitability Ratios…arrow_forward
- Compute Liquidity and Solvency Ratios for Competing Firms Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements. $ millions Cash and equivalents Short-term investments Accounts receivable Current assets Current liabilities Total liabilities Total equity Earnings before interest and tax (EBIT) Interest expense, gross HAL SLB $2,008 $1,433 1,344 5,391 8,117 11,151 15,731 4,946 13.891 16,438 33,921 1. Current ratio 2. Quick ratio 3. Times interest earned 4. Liabilities-to-equity 9,830 37,684 2,541 3,142 554 537 a. Compute the following measures for both companies. Note: Round your final answers to two decimal places (for example, enter 6.78 for 6.77555). HAL SLB b. Which company appears more liquid? c. Which company appears more solvent? ◆arrow_forwardSolve and perform the different financial ratios using the financial statements of XYZ Company for the year 2021. 1. Current Ratio 2. Quick Ratio 3. Receivables Turnover 4. Inventory Turnover 5. Debt Ratio 6. Equity Ratio 7. Times Interest Earned 8. Gross Profit Margin 9. Operating Profit Margin 10. Net Profit Marginarrow_forwardCalculate the financial indicators of the firms J&J for the year 2018 and fill in the spaces marked in the table. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio …. …. 0.47 Debt-to-equity ratio …. …. 0.38 Interest coverage ratio …. …. -9.43 Liquidity Ratios Current ratio …. …. 3.47 Quick ratio …. …. 2.12 Cash ratio …. …. 2.24 Profitability Ratios Profit margin …. …. -93.4% ROE (Return on equity), after tax …. …. -248.5 ROA (Return on assets) …. …. -146.5 Gross margin …. …. 55.3% Operating margin (Return on sales) …. …. -42.9% Activity or Efficiency Ratios Asset turnover …. …. 1.08 Receivables turnover (days) …. …. 16 Inventory turnover (days)…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningFinancial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Intermediate Accounting: Reporting And Analysis
Accounting
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,