Problem #15-17 Year 3 Year 2 Year 1 Make sure you see how the years are charted Sales trend 128 115 100 Current ratio 2.5 2.3 2.2 Acid-test ratio 0.8 0.9 1.1 Accounts receiveable turnover 9.4 10.6 12.5 Inventory turnover 6.5 7.2 8 Dividend yield 7.10% 6.50% 5.80% Dividend payout ratio 40.00% 50.00% 60.00% Return on total assets 12.50% 11.00% 9.50% Return on equity 14.00% 10.00% 7.80% Dividends paid per share $1.50 $1.50 $1.50 A Is it becoming easier for the company to pay its bills as they come due? Look at the Acid Test Ratio B Are customers paying their accounts at least as fast now as they were in Year 1? Look at the A/R turnover C Is the total of the accounts receivable increasing, decreasing, or remaining constant? Look at A/R turnover and sales D Is the level of inventory increasing, decreasing, or remaining constant? Look at inventory turnover and sales E Is the market price of the company’s stock going up or down? look at dividends per share and dividend yield; must know the inputs of formula for market price F Is the earnings per share increasing or decreasing? must know the inputs of the formula G Is the price-earning ratio going up or down? must know the inputs of the formula

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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Problem #15-17
	Year 3	Year 2	Year 1	Make sure you see how the years are charted
Sales trend	128	115	100
Current ratio	2.5	2.3	2.2
Acid-test ratio	0.8	0.9	1.1
Accounts receiveable turnover	9.4	10.6	12.5
Inventory turnover	6.5	7.2	8
Dividend yield	7.10%	6.50%	5.80%
Dividend payout ratio	40.00%	50.00%	60.00%
Return on total assets	12.50%	11.00%	9.50%
Return on equity	14.00%	10.00%	7.80%
Dividends paid per share	$1.50	$1.50	$1.50

A	Is it becoming easier for the company to pay its bills as they come due?				Look at the Acid Test Ratio
B	Are customers paying their accounts at least as fast now as they were in Year 1?				Look at the A/R turnover
C	Is the total of the accounts receivable increasing, decreasing, or remaining constant?				Look at A/R turnover and sales
D	Is the level of inventory increasing, decreasing, or remaining constant?				Look at inventory turnover and sales
E	Is the market price of the company’s stock going up or down?				look at dividends per share and dividend yield; must know the inputs of formula for market price
F	Is the earnings per share increasing or decreasing?				must know the inputs of the formula
G	Is the price-earning ratio going up or down?				must know the inputs of the formula

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