Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 1ADM
Continuing Company Analysis-Amazon: Short-term liquidity analysis
Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions):
| Amazon | Best Buy | |
| Current assets: | ||
| Cash | $14,557 | $ 2,432 |
| Short-term investments | 2,859 | 1,456 |
| 5,612 | 1,280 | |
| Inventories | 8,299 | 5,174 |
| Other current assets | — | 1,387 |
| Total current assets | $31,327 | $11,729 |
| Current liabilities: | ||
| Accounts payable | $16,459 | $ 5,122 |
| Other current liabilities | 11,630 | 2,314 |
| Total current liabilities | $28,089 | $ 7,436 |
A. Compute
B. Compute the
C. Compute the quick ratio for each company. (Round to one decimal place)
D. Can the working capital be usefully compared between the two companies? Explain.
E. Which company has the greater debt-paying ability according to the current ratio?
F. Which company has the greater short-term debt-paying ability according to the quick ratio?
G. Why are the results different between (E) and (F)? (Hint: Perform a vertical analysis of the current assets)
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Students have asked these similar questions
Compute Liquidity and Solvency Ratios for Competing Firms
Halliburton and Schlumberger compete in the oil field services sector. Refer to the following 2018 financial data for the two companies to answer the requirements.
$ millions
Cash and equivalents
Short-term investments
Accounts receivable
Current assets
Current liabilities
Total liabilities
Total equity
Earnings before interest and tax (EBIT)
Interest expense, gross
HAL SLB
$2,008 $1,433
1,344
5,391 8,117
11,151 15,731
4,946 13.891
16,438 33,921
1. Current ratio
2. Quick ratio
3. Times interest earned
4. Liabilities-to-equity
9,830 37,684
2,541 3,142
554 537
a. Compute the following measures for both companies.
Note: Round your final answers to two decimal places (for example, enter 6.78 for 6.77555).
HAL
SLB
b. Which company appears more liquid?
c. Which company appears more solvent?
◆
Please donot provide solution in image format provide solution in step by step format and fast solution
Using the information from Part I, comment on the following financial elements of Target Corporation:
Based on the information above, what is Total Asset Turnover Ratio of ratio of the firm?
Group of answer choices
1.40
1.68
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Chapter 10 Solutions
Financial & Managerial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Prob. 8DQCh. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Prob. 10.3BECh. 10 - Journalize payroll tax The payroll register of...Ch. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Prob. 10.1EXCh. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Prob. 10.6EXCh. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Prob. 10.10EXCh. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Pension plan entries Yuri Co. operates a chain of...Ch. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.21EXCh. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Prob. 10.3BPRCh. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3CPPCh. 10 - Continuing Company Analysis-Amazon: Short-term...Ch. 10 - Prob. 2ADMCh. 10 - Prob. 3ADMCh. 10 - Prob. 4ADMCh. 10 - Prob. 10.1TIFCh. 10 - Prob. 10.3TIF
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