Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage % % 3. Fixed Asset Turnover
Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin % % 2. Gross Profit Percentage % % 3. Fixed Asset Turnover
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
Related questions
Question
![The financial statements for Royale and Cavalier companies are summarized here:
Cavalier
Royale Company
Company
Balance Sheet
$ 31,000
61,000
122,000
562,000
146,000
$ 51,000
22,000
37,000
172,000
52,000
Cash
Accounts Receivable, Net
Inventory
Equipment, Net
Other Assets
$ 922,000
$ 334,000
$ 27,000
67,000
216,000
10,000
14,000
$ 334,000
Total Assets
$ 132,000
202,000
486,000
56,000
Current Liabilities
Notes Payable (long-term)
Common Stock (par $20)
Additional Paid-In Capital
Retained Earnings
46,000
Total Liabilities and Stockholders' Equity
$ 922,000
Income Statement
$ 818,000
$ 298,000
156,000
101,000
Sales Revenue
Cost of Goods Sold
486,000
246,000
Other Expenses
$ 86,000
$ 41,000
Net Income
Other Data
$ 18.00
$ 15.00
Per share price at end of year
Selected Data from Previous Year
Accounts Receivable, Net
Notes Payable (long-term)
Equipment, Net
Inventory
Total Stockholders' Equity
$ 53,000
202,000
562,000
101,000
588,000
$ 20,000
67,000
172,000
44,000
240,000
These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years.
Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and
Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an
aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current
year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe27a7d6a-82ba-413f-8d91-dbbbfb703505%2F17245d88-889f-4fc6-be48-cae2ba902f4a%2Facctpcn_processed.png&w=3840&q=75)
Transcribed Image Text:The financial statements for Royale and Cavalier companies are summarized here:
Cavalier
Royale Company
Company
Balance Sheet
$ 31,000
61,000
122,000
562,000
146,000
$ 51,000
22,000
37,000
172,000
52,000
Cash
Accounts Receivable, Net
Inventory
Equipment, Net
Other Assets
$ 922,000
$ 334,000
$ 27,000
67,000
216,000
10,000
14,000
$ 334,000
Total Assets
$ 132,000
202,000
486,000
56,000
Current Liabilities
Notes Payable (long-term)
Common Stock (par $20)
Additional Paid-In Capital
Retained Earnings
46,000
Total Liabilities and Stockholders' Equity
$ 922,000
Income Statement
$ 818,000
$ 298,000
156,000
101,000
Sales Revenue
Cost of Goods Sold
486,000
246,000
Other Expenses
$ 86,000
$ 41,000
Net Income
Other Data
$ 18.00
$ 15.00
Per share price at end of year
Selected Data from Previous Year
Accounts Receivable, Net
Notes Payable (long-term)
Equipment, Net
Inventory
Total Stockholders' Equity
$ 53,000
202,000
562,000
101,000
588,000
$ 20,000
67,000
172,000
44,000
240,000
These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years.
Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and
Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an
aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current
year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account.
![1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal
places.)
Cavalier
Ratio
Royale Company
Company
Tests of Profitability:
1. Net Profit Margin
%
%
2. Gross Profit Percentage
|%
3. Fixed Asset Turnover
4. Return on Equity
%
5. Earnings per Share
6. Price/Earnings Ratio
Tests of Liquidity:
7. Receivables Turnover
7. Days to Collect
8. Inventory Turnover
8. Days to Sell
9. Current Ratio
Tests of Solvency:
10. Debt-to-Assets](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe27a7d6a-82ba-413f-8d91-dbbbfb703505%2F17245d88-889f-4fc6-be48-cae2ba902f4a%2Fkkhuuv_processed.png&w=3840&q=75)
Transcribed Image Text:1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal
places.)
Cavalier
Ratio
Royale Company
Company
Tests of Profitability:
1. Net Profit Margin
%
%
2. Gross Profit Percentage
|%
3. Fixed Asset Turnover
4. Return on Equity
%
5. Earnings per Share
6. Price/Earnings Ratio
Tests of Liquidity:
7. Receivables Turnover
7. Days to Collect
8. Inventory Turnover
8. Days to Sell
9. Current Ratio
Tests of Solvency:
10. Debt-to-Assets
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