19. (Ratio analysis) The financial statements and industry norms are shown below for the Congo Mining Company: Compute the financial ratios for Congo to compare both for 2017 and 2018 against the industry norms. a.
19. (Ratio analysis) The financial statements and industry norms are shown below for the Congo Mining Company: Compute the financial ratios for Congo to compare both for 2017 and 2018 against the industry norms. a.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![1-9. (Ratio analysis) The financial statements and industry norms are shown below
for the Congo Mining Company:
a. Compute the financial ratios for Congo to compare both for 2017 and 2018
against the industry norms.
b. How liquid is the firm?
c. Are its managers generating an adequate operating profit on the firm's
assets?
d. How is the firm financing its assets?
e. Are its managers generating a good return on equity?
INDUSTRY NORM
Current ratio
5.10
Acid-test (quick) ratio
3.20
Inventory turnover
240
Average collection period
88.00
Debt ratio
0.35
Times interest earned
7.15
Total asset turnover
0.78
Fixed-asset turnover
1.10
Operating profit margin
23%
Return on common equity
11%
The Congo Mining Company Balance Sheet at 12/31/2017 and 12/31/2018
Assets
2017
2018
Cash
$ 220
$ 170
430
415
Accounts receivable
Inventory
570
655
$1,220
$1,240
Current assets
$2,300
$2,700
Plant and equipment
(1.300)
$1,400
(1.000)
Less accumulated depreciation
Net plant and equipment
$1,300
$2.520
$2.640
Total assets
Liabilities and Owners' Equity
Accounts payable
Notes payable-current (9%)
Current liabilities
$ 220
$ 170
170
$ 340
700
220
700
Bonds (8.65% interest)
Total debt
$1,040
$ 920
$ 350
$ 350
Owners' equity Common stock
600
600
Paid-in capital
650
$1.600
650
$1.600
Retained earnings
Total owners' equity
$2.640
$2.520
Total liabilities and owners' equity](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F4cf8e2b6-effa-4474-94db-31a571c612e1%2F8e080e64-b414-4f24-8db3-5e1380ef62f6%2Fkrxoqz_processed.jpeg&w=3840&q=75)
Transcribed Image Text:1-9. (Ratio analysis) The financial statements and industry norms are shown below
for the Congo Mining Company:
a. Compute the financial ratios for Congo to compare both for 2017 and 2018
against the industry norms.
b. How liquid is the firm?
c. Are its managers generating an adequate operating profit on the firm's
assets?
d. How is the firm financing its assets?
e. Are its managers generating a good return on equity?
INDUSTRY NORM
Current ratio
5.10
Acid-test (quick) ratio
3.20
Inventory turnover
240
Average collection period
88.00
Debt ratio
0.35
Times interest earned
7.15
Total asset turnover
0.78
Fixed-asset turnover
1.10
Operating profit margin
23%
Return on common equity
11%
The Congo Mining Company Balance Sheet at 12/31/2017 and 12/31/2018
Assets
2017
2018
Cash
$ 220
$ 170
430
415
Accounts receivable
Inventory
570
655
$1,220
$1,240
Current assets
$2,300
$2,700
Plant and equipment
(1.300)
$1,400
(1.000)
Less accumulated depreciation
Net plant and equipment
$1,300
$2.520
$2.640
Total assets
Liabilities and Owners' Equity
Accounts payable
Notes payable-current (9%)
Current liabilities
$ 220
$ 170
170
$ 340
700
220
700
Bonds (8.65% interest)
Total debt
$1,040
$ 920
$ 350
$ 350
Owners' equity Common stock
600
600
Paid-in capital
650
$1.600
650
$1.600
Retained earnings
Total owners' equity
$2.640
$2.520
Total liabilities and owners' equity
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