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10 percent 1.5 times ver: 5 percent the Robinson Hotel equal $5,000,000. Assume the balance sheet and end of the year are the same.

10 percent 1.5 times ver: 5 percent the Robinson Hotel equal $5,000,000. Assume the balance sheet and end of the year are the same.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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**Problem 5** The Robinson Hotel has the following financial ratios: - Return on equity: 10 percent - Total asset turnover: 1.5 times - Return on sales: 5 percent The total assets of the Robinson Hotel equal $5,000,000. Assume the balance sheet numbers at the beginning and end of the year are the same. **Required:** 1. Determine the firm's total annual sales. 2. Determine the firm's net income. 3. Determine the amount of the firm's total debt.
Transcribed Image Text:**Problem 5** The Robinson Hotel has the following financial ratios: - Return on equity: 10 percent - Total asset turnover: 1.5 times - Return on sales: 5 percent The total assets of the Robinson Hotel equal $5,000,000. Assume the balance sheet numbers at the beginning and end of the year are the same. **Required:** 1. Determine the firm's total annual sales. 2. Determine the firm's net income. 3. Determine the amount of the firm's total debt.
### Problem 2 McDaniel's Place has selected financial ratios for 20X1–20X3 as follows: | | 20X1 | 20X2 | 20X3 | |---------------------|------|------|------| | Current ratio | 1.1 | 1.15 | 1.2 | | Accounts receivable turnover | 13 | 12 | 11 | | Inventory turnover | 24 | 23 | 22 | | Asset turnover | 1.3 | 1.4 | 1.5 | | Debt-equity ratio | 1.5 | 1.4 | 1.3 | | Times interest earned | 3.8 | 3.9 | 4.0 | Sales for the three years were $1 million, $1.2 million, and $1.4 million, respectively. ### Required: 1. Assume total assets did not change during 20X3. Determine the total debt at the end of 20X3. 2. If cost of sales were 10 percent of total sales, what was the average inventory for 20X3? 3. Comment on the changing liquidity of McDaniel’s Place over the three-year period. 4. Comment on the changing solvency of this business over the three-year period.
Transcribed Image Text:### Problem 2 McDaniel's Place has selected financial ratios for 20X1–20X3 as follows: | | 20X1 | 20X2 | 20X3 | |---------------------|------|------|------| | Current ratio | 1.1 | 1.15 | 1.2 | | Accounts receivable turnover | 13 | 12 | 11 | | Inventory turnover | 24 | 23 | 22 | | Asset turnover | 1.3 | 1.4 | 1.5 | | Debt-equity ratio | 1.5 | 1.4 | 1.3 | | Times interest earned | 3.8 | 3.9 | 4.0 | Sales for the three years were $1 million, $1.2 million, and $1.4 million, respectively. ### Required: 1. Assume total assets did not change during 20X3. Determine the total debt at the end of 20X3. 2. If cost of sales were 10 percent of total sales, what was the average inventory for 20X3? 3. Comment on the changing liquidity of McDaniel’s Place over the three-year period. 4. Comment on the changing solvency of this business over the three-year period.
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