a. Return on equityb. Total assets turnoverc. Return on assetsd. Current ratioe. Receivables turnover Q5. Analysis of Financial StatementsThere was a bit of concem 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:Cash500,000 Accounts Payable300,000 Notes Payable700,000Accounts Receivable500,000Inventory800,000Total Current Assets1,300,000 Total Current Liabilities1,200,000Owners' Equity2,200,000 Common Stock ($1 Par)600,000 Capital Surplus1,600,000 Retained Earnings2,900,000 Total Owners' EquityFixed Assets:Property, Plant & EquipmentLess: Accumulated Depreciation600,000100,000Net Fixed Assets100,000Total Assets800,000Total Liabilities and OwnersEquity2,900,000Big Rock Paving CompanyIncome Statement for Year Ending December 31, 2021Sales3,400,000Less: Cost of Goods Sold2,700,000Less: Administrative ExpensesLess DepreciationEarnings Before Interest and TaxesLess: Interest Expense700,000682.000(682,000)120.000(802,000)(280,000)(522,000)Taxable IncomeLess: TaxesNet IncomeDividendsAddition to Retained Earmings(522,000)Required: Evaluate the performance of Big Rock Paving Company using the belowratios. Define cach ratio, perform the calculation, and provide an explanation of theresult.

a. Return on equity = Net Income / Shareholders' Equityb. Total assets turnover = Sales / Total…

Answered: a. Return on equity b. Total assets…

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a. Return on equity b. Total assets turnover c. Return on assets d. Current ratio e. Receivables turnover

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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Question

a. Return on equity
b. Total assets turnover
c. Return on assets
d. Current ratio
e. Receivables turnover

Q5. Analysis of Financial Statements
There was a bit of concem about one of Big Rock's newer entities - Big Rock Paving
Company. Management wants you to review the two financial statements below and give
your analysis of the company's performance.
Big Rock Paving Company
Assets
Liabilities
Current Assets:
Current Liabilities:
Cash
500,000 Accounts Payable
300,000 Notes Payable
700,000
Accounts Receivable
500,000
Inventory
800,000
Total Current Assets
1,300,000 Total Current Liabilities
1,200,000
Owners' Equity
2,200,000 Common Stock ($1 Par)
600,000 Capital Surplus
1,600,000 Retained Earnings
2,900,000 Total Owners' Equity
Fixed Assets:
Property, Plant & Equipment
Less: Accumulated Depreciation
600,000
100,000
Net Fixed Assets
100,000
Total Assets
800,000
Total Liabilities and Owners
Equity
2,900,000
Big Rock Paving Company
Income Statement for Year Ending December 31, 2021
Sales
3,400,000
Less: Cost of Goods Sold
2,700,000
Less: Administrative Expenses
Less Depreciation
Earnings Before Interest and Taxes
Less: Interest Expense
700,000
682.000
(682,000)
120.000
(802,000)
(280,000)
(522,000)
Taxable Income
Less: Taxes
Net Income
Dividends
Addition to Retained Earmings
(522,000)
Required: Evaluate the performance of Big Rock Paving Company using the below
ratios. Define cach ratio, perform the calculation, and provide an explanation of the
result.

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