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FINANCIAL ACCOUNTING
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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Gross profit Operating expenses Interest expense Income before taxes Income tax expense Net income Net income per share Return on Assets Profit Margin Asset Turnover For both companies, compute the ratios below. Note: Consider 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. Return on Equity Equity Multiplier Acid-Test Ratio Current Ratio Receivables Turnover Inventory Turnover Times Interest Earned Merz Evaluate and compare the two companies. % % times % times times times <Required 1 Schueler % % times % times times times < Required 1 Required 2 > Analysis Which of the two firms had greater eamings relative to resources available? Have the two companies achieved their respective rates of return on assets with similar combinations of profit margin and turnover? From the perspective of a common shareholder, which of the two firms provided a greater rate of retur? Which company is most highly leveraged and which has made most effective use of financial leverage? Of the two companies, which appears riskier in terms of its ability to pay short-term obligations? 3,003.0 (1,628.7) (93.8) 1,280.5 (278.7) $1,001.8 $.7 Which of the two companies manages their current assets more efficiently? From the perspective of a creditor, which company offers the most comfortable margin of safety in terms of its ability to pay fixed interest charges? Required 2 > 3,505.5 (2,914.2) (46.6) 544.7 (21.1) $523.6 $ 8.1
Transcribed Image Text:Gross profit Operating expenses Interest expense Income before taxes Income tax expense Net income Net income per share Return on Assets Profit Margin Asset Turnover For both companies, compute the ratios below. Note: Consider 365 days a year. Do not round intermediate calculations and round your final answers to 2 decimal places. Return on Equity Equity Multiplier Acid-Test Ratio Current Ratio Receivables Turnover Inventory Turnover Times Interest Earned Merz Evaluate and compare the two companies. % % times % times times times <Required 1 Schueler % % times % times times times < Required 1 Required 2 > Analysis Which of the two firms had greater eamings relative to resources available? Have the two companies achieved their respective rates of return on assets with similar combinations of profit margin and turnover? From the perspective of a common shareholder, which of the two firms provided a greater rate of retur? Which company is most highly leveraged and which has made most effective use of financial leverage? Of the two companies, which appears riskier in terms of its ability to pay short-term obligations? 3,003.0 (1,628.7) (93.8) 1,280.5 (278.7) $1,001.8 $.7 Which of the two companies manages their current assets more efficiently? From the perspective of a creditor, which company offers the most comfortable margin of safety in terms of its ability to pay fixed interest charges? Required 2 > 3,505.5 (2,914.2) (46.6) 544.7 (21.1) $523.6 $ 8.1
Assets Cash Accounts receivable (net) Short-term investments Inventory Prepaid expenses and other current assets Current assets Property, plant, and equipment (net) Intangibles and other assets Total assets Liabilities and Shareholders' Equity Accounts payable Short-term notes Accruals and other current liabilities Current liabilities Long-term debt Deferred tax liability Other long-term liabilities Balance Sheets Total liabilities Common stock (par and additional paid-in capital) Retained earnings Less: Treasury stock. Total liabilities and shareholders' equity. Income Statements Net sales Cost of goods sold Sysco & Merz Corporation $ 298.3 528.7 578.4 236.6 1,642.0 2,718.2 316.3 $ 4,676.5 $ 594.9 327.1 699.2 1,621.2 664.6 491.6 234.0 3,011.4 245.9 2,583.9 (1,164.7) $ 4,676.5 $5,808.0 (2,805.0) United Natural Foods & Schueler $ 43.6 434.0 8.7 736.2 592.7 1,815.3 2,765.6 622.5 $ 5,203.4 $ 800.2 663.4 634.5 2,098.1 670.3 721.7 214.1 3,704.2 457.0 1,709.9 (667.7) $ 5,203.4 $ 7,875.2 (4,369.7)
Transcribed Image Text:Assets Cash Accounts receivable (net) Short-term investments Inventory Prepaid expenses and other current assets Current assets Property, plant, and equipment (net) Intangibles and other assets Total assets Liabilities and Shareholders' Equity Accounts payable Short-term notes Accruals and other current liabilities Current liabilities Long-term debt Deferred tax liability Other long-term liabilities Balance Sheets Total liabilities Common stock (par and additional paid-in capital) Retained earnings Less: Treasury stock. Total liabilities and shareholders' equity. Income Statements Net sales Cost of goods sold Sysco & Merz Corporation $ 298.3 528.7 578.4 236.6 1,642.0 2,718.2 316.3 $ 4,676.5 $ 594.9 327.1 699.2 1,621.2 664.6 491.6 234.0 3,011.4 245.9 2,583.9 (1,164.7) $ 4,676.5 $5,808.0 (2,805.0) United Natural Foods & Schueler $ 43.6 434.0 8.7 736.2 592.7 1,815.3 2,765.6 622.5 $ 5,203.4 $ 800.2 663.4 634.5 2,098.1 670.3 721.7 214.1 3,704.2 457.0 1,709.9 (667.7) $ 5,203.4 $ 7,875.2 (4,369.7)
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