# Analyzing and Interpreting Liquidity Using Financial Statements## OverviewThis educational resource focuses on analyzing liquidity through financial statements. The data provided pertains to Simon Company's financial health over several years. The exercise involves calculating accounts receivable turnover and determining trends in financial performance.## Financial Data### Balance Sheets (at December 31)#### Assets- **Cash**: - Current Year: $26,794 - 1 Year Ago: $31,320 - 2 Years Ago: $32,958- **Accounts Receivable, Net**: - Current Year: $89,900 - 1 Year Ago: $62,100 - 2 Years Ago: $50,500- **Merchandise Inventory**: - Current Year: $111,000 - 1 Year Ago: $84,000 - 2 Years Ago: $53,000- **Prepaid Expenses**: - Current Year: $8,629 - 1 Year Ago: $8,221 - 2 Years Ago: $3,662- **Plant Assets, Net**: - Current Year: $227,082 - 1 Year Ago: $213,846 - 2 Years Ago: $199,580- **Total Assets**: - Current Year: $463,405 - 1 Year Ago: $399,487 - 2 Years Ago: $339,700#### Liabilities and Equity- **Accounts Payable**: - Current Year: $113,080 - 1 Year Ago: $66,163 - 2 Years Ago: $43,944- **Long-term Notes Payable (secured by mortgages on plant assets)**: - Current Year: $85,378 - 1 Year Ago: $90,044 - 2 Years Ago: $73,572- **Common Stock, $10 par value**: $162,500 (constant over years)- **Retained Earnings**: - Current Year: $102,447 - 1 Year Ago: $80,780 - 2 Years Ago: $59,684- **Total Liabilities and Equity**: - Current Year

Name: # Analyzing and Interpreting Liquidity Using Financial Statements## O
Uploaded: 2024-03-04T10:43:15.000Z
Channel: Bartleby
Description: # Analyzing and Interpreting Liquidity Using Financial Statements## OverviewThis educational resource focuses on analyzing liquidity through financial statements. The data provided pertains to Simon Company's financial health over several years. The

Account Receivable Turnover = Net Credit Sales/ Average Accounts Receivable

Answered: -a) Compute accounts receivable…

Business

Accounting

-a) Compute accounts receivable tunover. -b) For each ratio, determine if it improved or worsened in the current year. Complete

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter6: Cash And Internal Control

Section: Chapter Questions

Problem 6.4MCP

See similar textbooks

Related questions

Q: n aging analysis of accounts receivable is a study of the maturity of accounts receivable, such that…

A: Aging analysis is very important in financial health of company and credit policy of the company.

Q: In which of the following types of accounts are increases recorded by credits? A. revenues and…

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Q: How is a financial ratio analysis performed? Comparing two items in financial statements. Evaluating…

A: Performing a financial ratio analysis involves examining and interpreting various ratios derived…

Q: labili sets/Net Sale

A: The correct answer is D. Net sales / Average Total Assets

Q: Which of the following accounts is a temporary account? Multiple Choice Accounts receivable.…

A: Temporary accounts are written off in the income statement and not visible in the balance sheet.…

Q: Which of the following statements is true regarding aging accounts receivable? Multiple Choice All…

A: Aging accounts receivable is the report which is prepared to show the category of accounts…

Q: he companative financal satements of Mara Inc. ane a follows. The markt prie of Marshal comman stock…

A: Financial Ratios- A financial ratio or accounting ratio is a relative scale of two selected…

Q: The primary focus of horizontal analysis isa. the income statement only.b. the balance sheet only.c.…

A: Financial statements can be analysed by using two methods. 1) Vertical method. 2) Horizontal method.…

Q: Determine the return on total assets. If required, round the percentage to one decimal place.

A: Return on total assets: Return on total assets is an indicator on how well a company’s investments…

Q: Want The Correct Answer with calculation and explanation in text mode

A: 1) Contribution Margin Ratio:Contribution Margin Ratio is a measure of a company's profitability…

Q: An aging analysis of accounts receivable is a study of the maturity of accounts receivable, such…

A: Accounts receivables arise when the business provides goods/services on credit to their clients.…

Q: The income statement is drawn up from the figures in the _________________ Select one: a. Accounts…

A: An income statement may be defined as that type financial statement which is prepared to ascertain…

Q: For VAT and Percentage transactions, state when will be the deadline for the remittances

A: VAT is value added tax and it is indirect tax which means tax is paid by consumer of goods or…

Q: Rosie Dry Cleaning was started on January 1, Year 1. It experienced the following events during its…

A: The account receivable refers to the amount of revenue that is yet to be recovered from the…

Q: The interim period is viewed as an integral part of the annual accounting period. b. The interim…

A: The correct option is (a) The interim period is viewed as an integral part of the annual accounting…

Q: Communication (income statement): The balance of Interest Expense from accruing interest to be paid…

A: The adjustment entries are prepared to adjust the revenue and expenses for the current period. The…

Q: In the balance sheet, accounts Receivable, where did you get 489,555 from?

A: Accounts receivable is a current asset created in the business when an amount is to be received from…

Q: When analyzing financial statements, what can you conclude when the accounts receivable turnover…

A: Average receivables turnover decreased form 9 to 6. This indicates that the collection period has…

Concept explainers

Financial Transaction Analysis

The transaction analysis is done with the help of the accounting equation. The basic accounting equation is alternatively known as the balance sheet equation is based on the double-entry system which says that for each transaction happening in a business, at least two accounts should be affected I.e. both the debit side and the credit side should be equal. The Accounting Equation is

Topic Video

Question

# Analyzing and Interpreting Liquidity Using Financial Statements

## Overview

This educational resource focuses on analyzing liquidity through financial statements. The data provided pertains to Simon Company's financial health over several years. The exercise involves calculating accounts receivable turnover and determining trends in financial performance.

## Financial Data

### Balance Sheets (at December 31)

#### Assets
- **Cash**:
- Current Year: $26,794
- 1 Year Ago: $31,320
- 2 Years Ago: $32,958
- **Accounts Receivable, Net**:
- Current Year: $89,900
- 1 Year Ago: $62,100
- 2 Years Ago: $50,500
- **Merchandise Inventory**:
- Current Year: $111,000
- 1 Year Ago: $84,000
- 2 Years Ago: $53,000
- **Prepaid Expenses**:
- Current Year: $8,629
- 1 Year Ago: $8,221
- 2 Years Ago: $3,662
- **Plant Assets, Net**:
- Current Year: $227,082
- 1 Year Ago: $213,846
- 2 Years Ago: $199,580

- **Total Assets**:
- Current Year: $463,405
- 1 Year Ago: $399,487
- 2 Years Ago: $339,700

#### Liabilities and Equity
- **Accounts Payable**:
- Current Year: $113,080
- 1 Year Ago: $66,163
- 2 Years Ago: $43,944
- **Long-term Notes Payable (secured by mortgages on plant assets)**:
- Current Year: $85,378
- 1 Year Ago: $90,044
- 2 Years Ago: $73,572
- **Common Stock, $10 par value**: $162,500 (constant over years)
- **Retained Earnings**:
- Current Year: $102,447
- 1 Year Ago: $80,780
- 2 Years Ago: $59,684

- **Total Liabilities and Equity**:
- Current Year

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions

Analysis of Financial StatementsThere was a bit of concern about one of Big Rock’s newer entities – Big Rock PavingCompany. Management wants you to review the two financial statements below and giveyour analysis of the company’s performance.Big Rock Paving CompanyAssetsLiabilitiesCurrent Assets: Current Liabilities:Cash 500,000 Accounts Payable 700,000Accounts Receivable 300,000 Notes Payable 500,000Inventory 800,000Total Current Assets 1,300,000 Total Current Liabilities 1,200,000Fixed Assets: Owners’ Equity:Property, Plant & Equipment 2,200,000 Common Stock ($1 Par) 600,000Less: Accumulated Depreciation 600,000 Capital Surplus 100,000Net Fixed Assets 1,600,000 Retained Earnings 100,000Total Assets 2,900,000 Total Owners’ Equity 800,000Total Liabilities and Owners’Equity2,900,000Big Rock Paving CompanyIncome Statement for Year Ending December 31, 2021Sales 3,400,000Less: Cost of Goods Sold 2,700,000Less: Administrative Expenses 700,000Less Depreciation 682,000Earnings Before…
Solve problem
Required information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable. Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity Current Year 1 Year Ago $ 29,682 52,463 $ 25,647 73,597 93,460 8,096 229,592 $430,392 $ 107,168 81,723 163,500 78,001 $430,392 Exercise 13-7 (Algo) Analyzing liquidity LO P3 Required 1A Required 1B (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period? 69,327 7,558 211,998 $ 371,028 Complete this question by entering…
Required Information Use the following information for the Exercises below. (Algo) [The following information applies to the questions displayed below.] Simon Company's year-end balance sheets follow. At December 31 Assets Cash Accounts receivable, net Merchandise inventory Prepaid expenses Plant assets, net Total assets Liabilities and Equity Accounts payable Long-term notes payable Common stock, $10 par value Retained earnings Total liabilities and equity Current Year 1 Year Ago 2 Years Ago $ 29,387 58,429 $ 29,125 40,023 66,638 $ 23,920 69,328 88,056 7,860 224,536 $ 413,700 7,564 282,628 $ 356,638 81,206 162,500 54,468 $101,981 76,998 $ 58,464 162,500 72,221 $ 413,780 $ 356,638 For both the current year and one year ago, compute the following ratios: 43,855 3,236 184,761 $ 300,200 $ 38,438 64,354 162,580 34,988 $ 300,200 Exercise 17-6 (Algo) Common-size percents LO P2 1. Express the balance sheets in common-size percents. 2. Assuming annual sales have not changed in the last three…
Current Position Analysis The following data were taken from the balance sheet of Albertini Company at the end of two recent fiscal years: Previous Year Current assets: Cash Marketable securities Accounts and notes receivable (net) Inventories Prepaid expenses. Total current assets. Current liabilities: Accounts and notes payable (short-term) Accrued liabilities Total current liabilities 1. Working capital 2. Current ratio: Current Year 3. Quick ratio b. The liquidity of Albertini has $356,400 412,700 168,900 1,547,700 797,300 $3,283,000 $388,600 281,400 $670,000 $278,400 313,200 104,400 1,167,500 746,500 $2,610,000 a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place. Current Year Previous Year $406,000 174,000 $580,000 from the preceding year to the current year. The working capital, current ratio, and quick ratio have all in current assets relative to current liabilities. Most of these changes are the…
Need help filling in the following blank information. Thank you!
Please do fast answer with correct calculation for this accounting question
Subject: acounting
Subject: acounting
P (Financial statement analysis) The T. P. Jarmon Company manufactures and sells a line of exclusive sportswear. The firm's sales were $600,100 for the year just ended, and its total assets exceeded $500,000. The company was started by Mr. Jarmon just 10 years ago and has been profitable every year since its inception. The chief financial officer for the firm, Brent Vehlim, has decided to seek a line of credit from the firm's bank totaling $83,000. In the past, the company has relied on its suppliers to finance a large part of its needs for inventory. However, in recent months tight money conditions have led the firm's suppliers to offer sizable cash discounts to speed up payments for purchases. Mr. Vehlim wants to use the line of credit to supplant a large portion of the firm's payables during the summer, which is the firm's peak seasonal sales period. The firm's two most recent balance sheets were presented to the bank in support of its loan request. In addition, the firm's income…
None
Exercise 17-7 (Algo) Analyzing liquidity LO P3 (1-a) Compute the current ratio for each of the three years. (1-b) Did the current ratio improve or worsen over the three-year period? (2-a) Compute the acid-test ratio for each of the three years. (2-b) Did the acid-test ratio improve or worsen over the three-year period? Complete this question by entering your answers in the tabs below. Required 1A Required 1B Required 2A Required 2B Compute the current ratio for each of the three years. Current Year: 1 Year Ago: 2 Years Ago: Numerator: 1 1 1 1 1 Current Ratio Denominator: