Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012:
(a) accounts receivable turnover
(b) inventory turnover
(c) days' sales uncollected
(d) days' sales in inventory
(e) profit margin.
(f) return on total assets.
December 31 December 31
For the 2012 2011 Year 2012
Accounts receivable……………………. $ 27,000 $ 24,000
Merchandise inventory………………. 25,000 20,000
Total assets…………………………………. 296,000 244,000
Accounts payable………………………… 26,000 32,000
Salaries payable…………………………… 3,000 4,400
Sales (all on credit)………………………. $312,000
Cost of goods sold……………………….. 165,600
Salaries expenses………………………… 48,000
Other expenses…………………………… 75,000
Net income………………………………….. 24,000
Click here for the solution: Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012
Showing posts with label ratios. Show all posts
Showing posts with label ratios. Show all posts
Wednesday, November 11, 2015
Monday, October 26, 2015
Use the financial data shown below to calculate the following ratios for the current year
Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income statement data
Sales (all on credit)……………………………………………….. $650,000
Cost of goods sold…………………………………………………. 425,000
Income before taxes……………………………………………. 78,000
Net Income…………………………………………………………… 54,000
Ending Beginning
Balances Balances
Cash…………………………………………………………….. $ 19,500 $ 15,000
Accounts receivable (net)………………………….. 65,000 60,000
Inventory…………………………………………………… 71,500 64,500
Plant and equipment (net) ………………………… 195,000 183,900
Total assets………………………………………………… $351,000 $323,400
Current liabilities…………………………………………. $ 62,400 $ 52,700
Long-term notes payable ……………………………. 97,500 100,000
Click here for the solution: Use the financial data shown below to calculate the following ratios for the current year
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income statement data
Sales (all on credit)……………………………………………….. $650,000
Cost of goods sold…………………………………………………. 425,000
Income before taxes……………………………………………. 78,000
Net Income…………………………………………………………… 54,000
Ending Beginning
Balances Balances
Cash…………………………………………………………….. $ 19,500 $ 15,000
Accounts receivable (net)………………………….. 65,000 60,000
Inventory…………………………………………………… 71,500 64,500
Plant and equipment (net) ………………………… 195,000 183,900
Total assets………………………………………………… $351,000 $323,400
Current liabilities…………………………………………. $ 62,400 $ 52,700
Long-term notes payable ……………………………. 97,500 100,000
Click here for the solution: Use the financial data shown below to calculate the following ratios for the current year
Saturday, October 17, 2015
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Integrative—Complete ratio analysis
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios for the most recent year. (Assume a 365-day year.) Analyze its overall financial situation from both a cross-sectional and a time-series viewpoint. Break your analysis into evaluations of the firm’s liquidity, activity, debt, profitability, and market.
Click here for the solution: Given the following financial statements (below and on page 96), historical ratios, and industry averages, calculate Sterling Company’s financial ratios
Tuesday, September 15, 2015
Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price for Abbott Laboratories
28. Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price
for Abbott Laboratories. Use the average stock price each year to
calculate the price ratios.
Click here for the solution: Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price for Abbott Laboratories
Click here for the solution: Using the P/E, P/CF, and P/S ratios, estimate the 2010 share price for Abbott Laboratories
Sunday, September 13, 2015
4-56 The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs
4-56 (Analytical Review and Planning the Audit) The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs. The company is publicly held and is considered a small-to medium-size pharmaceutical company. Approximately 80% of its sales have been in prescription drugs; the remaining 20% are in medical supplies normally found in a drugstore. The primary purpose of the auditor’s calculations is to identify potential risk areas for the upcoming audit. The auditor recognizes that some of the data may signal the need to gather other industry- or company-specific data.
A number of the company’s drugs are patented. Its number-one selling drug, Anecillin, which will come off of patent in two years, has accounted for approximately 20% of the company's sales ‘during the past five years.
INDIANOLA PHARMACEUTICAL RATIO ANALYSIS
Ratio Current One Year Two Years Three Years Current
Year Previous Previous Previous Industry
Current ratio -----1.85 1.89 2.28 2.51 2.13
Quick ratio ------------------------------- 0.85 0.93 1.32 1.76 1.40
Interest coverage:
Times Interest earned------------------- 1.30 1.45 5.89 6.3 4.50
Days’ sales in receivables-------------- 109 96 100 72 69
Inventory turnover---------------------- 2.40 2.21 3.96 5.31 4.33
Days’ sales in inventory---------------- 152 165 92 69 84
Research & development as a
Percent of sales -------------------------- 1.3 1.4 1.94 2.03 4.26
Cost of goods sold as percent
Of sales------------------------------------ 38.5 40.2 41.2 43.8 44.5
Debt/equity ratio------------------------- 4.85 4.88 1.25 1.13 1.25
Earnings per share----------------------- $1.12 $2.50 $4.32 $4.26 n/a
Sales/tangible assets--------------------- 0.68 0.64 0.89 0.87 0.99
Sales/total assets------------------------- 0.33 0.35 0.89 0.87 0.78
Sales growth over past year---- 3% 15% 2% 4% 6%
Required
a. What major conclusions regarding financial reporting risk can be drawn from the information show in the table? Be specific in identifying specific account balances that have a high risk of misstatement. State how that risk analysis will be used in planning the audit. Be very specific in your answer. You should identify a minimum of four financial reporting risks that should be addressed during the audit and how they should be addressed.
b. What other critical background information might you want to obtain as part of the planning of the audit or would you gather during the conduct of the audit? Briefly indicate the probable sources of the information.
c. Based on the information, what major actions did the company take during the immediately preceding year? Explain.
Click here for the solution: The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs
A number of the company’s drugs are patented. Its number-one selling drug, Anecillin, which will come off of patent in two years, has accounted for approximately 20% of the company's sales ‘during the past five years.
INDIANOLA PHARMACEUTICAL RATIO ANALYSIS
Ratio Current One Year Two Years Three Years Current
Year Previous Previous Previous Industry
Current ratio -----1.85 1.89 2.28 2.51 2.13
Quick ratio ------------------------------- 0.85 0.93 1.32 1.76 1.40
Interest coverage:
Times Interest earned------------------- 1.30 1.45 5.89 6.3 4.50
Days’ sales in receivables-------------- 109 96 100 72 69
Inventory turnover---------------------- 2.40 2.21 3.96 5.31 4.33
Days’ sales in inventory---------------- 152 165 92 69 84
Research & development as a
Percent of sales -------------------------- 1.3 1.4 1.94 2.03 4.26
Cost of goods sold as percent
Of sales------------------------------------ 38.5 40.2 41.2 43.8 44.5
Debt/equity ratio------------------------- 4.85 4.88 1.25 1.13 1.25
Earnings per share----------------------- $1.12 $2.50 $4.32 $4.26 n/a
Sales/tangible assets--------------------- 0.68 0.64 0.89 0.87 0.99
Sales/total assets------------------------- 0.33 0.35 0.89 0.87 0.78
Sales growth over past year---- 3% 15% 2% 4% 6%
Required
a. What major conclusions regarding financial reporting risk can be drawn from the information show in the table? Be specific in identifying specific account balances that have a high risk of misstatement. State how that risk analysis will be used in planning the audit. Be very specific in your answer. You should identify a minimum of four financial reporting risks that should be addressed during the audit and how they should be addressed.
b. What other critical background information might you want to obtain as part of the planning of the audit or would you gather during the conduct of the audit? Briefly indicate the probable sources of the information.
c. Based on the information, what major actions did the company take during the immediately preceding year? Explain.
Click here for the solution: The following table contains calculations of several key ratios for Indianola Pharmaceutical Company, a maker of proprietary and prescription drugs
Friday, September 11, 2015
Why are ratios and trends used in financial analysis
1. Why are ratios and trends used in financial analysis?
Click here for the solution: Why are ratios and trends used in financial analysis
Click here for the solution: Why are ratios and trends used in financial analysis
Tuesday, August 18, 2015
Williams Glassware has estimated, at various debt ratios, the expected earnings per share
P12-21 (EPS and Optimal Debt Ratio) Williams Glassware has estimated, at various debt ratios, the expected earnings per share and the standard deviation of the earnings per share as shown in the following table.
Debt ratio Earnings per share (EPS) Standard deviation of EPS
0% $2.30 $1.15
20 3.00 1.80
40 3.50 2.80
60 3.95 3.95
80 3.80 5.53
a. Estimate the optimal debt ratio on the basis of the relationship between earnings per share and the debt ratio. You will probably find it helpful to graph the relationship.
b. Graph the relationship between the coefficient of variation and the debt ratio. Label the areas associated with business risk and financial risk.
Click here for the solution: Williams Glassware has estimated, at various debt ratios, the expected earnings per share
Debt ratio Earnings per share (EPS) Standard deviation of EPS
0% $2.30 $1.15
20 3.00 1.80
40 3.50 2.80
60 3.95 3.95
80 3.80 5.53
a. Estimate the optimal debt ratio on the basis of the relationship between earnings per share and the debt ratio. You will probably find it helpful to graph the relationship.
b. Graph the relationship between the coefficient of variation and the debt ratio. Label the areas associated with business risk and financial risk.
Click here for the solution: Williams Glassware has estimated, at various debt ratios, the expected earnings per share
Friday, August 14, 2015
Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts
10. Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts:
Cash = $5 million
Government securities = $7 million
Mortgage loans = $30 million
Other loans = $50 million
Fixed assets = $10 million
Intangible assets = $4 million
Loan-loss reserves = $5 million
Owners’ equity = $5 million
Trust-preferred securities = $3 million
Cash assets and government securities are not considered risky. Loans secured by real estate have a 50 percent weighting factor. All other loans have a 100 percent weighting factor in terms of riskiness.
a. Calculate the equity capital ratio.
b. Calculate the Tier 1 Ratio using risk-adjusted assets.
c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.
Click here for the solution: Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts
Cash = $5 million
Government securities = $7 million
Mortgage loans = $30 million
Other loans = $50 million
Fixed assets = $10 million
Intangible assets = $4 million
Loan-loss reserves = $5 million
Owners’ equity = $5 million
Trust-preferred securities = $3 million
Cash assets and government securities are not considered risky. Loans secured by real estate have a 50 percent weighting factor. All other loans have a 100 percent weighting factor in terms of riskiness.
a. Calculate the equity capital ratio.
b. Calculate the Tier 1 Ratio using risk-adjusted assets.
c. Calculate the Total Capital (Tier 1 plus Tier 2) Ratio using risk-adjusted assets.
Click here for the solution: Let’s assume that you have been asked to calculate risk-based capital ratios for a bank with the following accounts
Thursday, July 16, 2015
Use the following industry average ratios to construct a pro forma balance sheet for Carlos Menza, Inc
4-5A (Pro forma balance sheet construction) Use the following industry average ratios to construct a pro forma balance sheet for Carlos Menza, Inc.
Total asset turnover 2 times
Average collection period (assume a 365-day year) 9 days
Fixed asset turnover 5 times
Inventory turnover (based on cost of goods sold) 3 times
Current ratio 2 times
Sales (all on credit) $4.0 million
Cost of goods sold 75% of sales
Debt ratio 50%
Cash _____ Current liabilities _____
Inventory _____ Long-term debt _____
Accounts receivable _____ Common stock plus _____
Net fixed assets _____ Retained earnings _____
Total $ _____ Total $ _____
Click here for the solution: Use the following industry average ratios to construct a pro forma balance sheet for Carlos Menza, Inc
Total asset turnover 2 times
Average collection period (assume a 365-day year) 9 days
Fixed asset turnover 5 times
Inventory turnover (based on cost of goods sold) 3 times
Current ratio 2 times
Sales (all on credit) $4.0 million
Cost of goods sold 75% of sales
Debt ratio 50%
Cash _____ Current liabilities _____
Inventory _____ Long-term debt _____
Accounts receivable _____ Common stock plus _____
Net fixed assets _____ Retained earnings _____
Total $ _____ Total $ _____
Click here for the solution: Use the following industry average ratios to construct a pro forma balance sheet for Carlos Menza, Inc
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