Compare the Solvency, Liquidity and Profitability for the two companies AssetTurnoverReturnonAssetsReturnonCommonStockholder'sEquityDebt toAssetsTimesInterestEarnedCashDebtCoverageNet sales/Averagetotal assetsNetincome/total assetsNet income-Preferreddividend/Averagecommonstockholdersequitynet cashprovidedbyoperatingactivities/a /2=0.26veragetotalliabilitynet cashprovidedbyoperatingactivities-Capitalexpenditure- cashdividends61,750/43,850+41,850/2=1.44362,000/159,750+161,250/2-2.253,245/41,850=0.07713,580/159,750=0.083245-495/13,240+15450=0.1913,580-3850/62480+71,450=0.144900/28,750 +26050/2 0.17= 0.1725,900/94,500+98,3004,900-1,452-495=2,95325,900-10,750-3,850-1 1,300freeCashFlow0.077ON2,9532.250.080.2611300 AccessibilitRatio Analysis FormulacurrentCurrentratioassets/CurrentliabilitiesAccountNet sales/ 61,750/8100-7.6Receivab Average362.000/4120=87.8leaccountsTurnove receivable,rnetAverage 365/365/7.6-48Collecti AccountonReceivable365/87.8-4.15Period Turnover39.900/8,020-4.97Inventor Cost ofgoodsYTurnove sold/27,680/32,500=0.8rAverageinventoryDays inAverage8.020/39,900*365=73.Inventor inventory/3Ycost ofgood32.500/27,680*365=4sold*36528net cashprovided by4900/11,245+10.300/2=0.45operatingactivities/average25,900/52,640+50,450/2=current0.50liability3,245/61750=0.05013,580/362,000=0.03currentCashDebtCoverageProfit NetMarginincome/net sales$20,245/$11,245=1.8$48,750/ $50,450=0.9Pan InterpretAlOth da, ationaim Incsannaning1.8 0.97.6 87.848.024.154.97 0.873.3428.50.45 0.500.05 0.03

Solvency of any company is the ability of the company to run its day to day operation. The solvency…

Answered: Compare the Solvency, Liquidity and…

Business

Accounting

Compare the Solvency, Liquidity and Profitability for the two companies

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

Compare the Solvency, Liquidity and Profitability for the two companies

Asset
Turnove
r
Return
on
Assets
Return
on
Commo
n
Stockhol
der's
Equity
Debt to
Assets
Times
Interest
Earned
Cash
Debt
Coverag
e
Net sales/
Average
total assets
Net
income/tot
al assets
Net income-
Preferred
dividend/Ave
rage
common
stockholders
equity
net cash
provided
by
operating
activities/a /2=0.26
verage
total
liability
net cash
provided
by
operating
activities-
Capital
expenditur
e- cash
dividends
61,750/43,850+41,850
/2=1.44
362,000/159,750+161,
250/2-2.25
3,245/41,850=0.077
13,580/159,750=0.08
3245-
495/13,240+15450=
0.19
13,580-
3850/62480+71,450=
0.14
4900/28,750 +26050/2 0.17
= 0.17
25,900/94,500+98,300
4,900-1,452-495=
2,953
25,900-10,750-
3,850-1 1,300
free
Cash
Flow
0.077
ON
2,953
2.25
0.08
0.26
1130
0

Accessibilit
Ratio Analysis Formula
current
Current
ratio
assets/
Current
liabilities
Account
Net sales/ 61,750/8100-7.6
Receivab Average
362.000/4120=87.8
le
accounts
Turnove receivable,
r
net
Average 365/
365/7.6-48
Collecti Account
on
Receivable
365/87.8-4.15
Period Turnover
39.900/8,020-4.97
Inventor Cost of
goods
Y
Turnove sold/
27,680/32,500=0.8
r
Average
inventory
Days in
Average
8.020/39,900*365=73.
Inventor inventory/3
Y
cost of
good
32.500/27,680*365=4
sold*365
28
net cash
provided by
4900/11,245+10.300/2=
0.45
operating
activities/
average
25,900/52,640+50,450/2=
current
0.50
liability
3,245/61750=0.050
13,580/362,000=0.03
current
Cash
Debt
Coverag
e
Profit Net
Margin
income/ne
t sales
$20,245/$11,245=1.8
$48,750/ $50,450=0.9
Pan Interpret
Al
Oth da, ation
aim Inc
sannaning
1.8 0.9
7.6 87.8
48.02
4.15
4.97 0.8
73.3
428.
5
0.45 0.50
0.05 0.03

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