Ratio analysis It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company. Following are the two measures of liquidity: 1. Current ratio : Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1. 2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable . 3. Working capital : Total current assets minus total current liabilities are the working capital of a company. To compute: The working capital for three years.

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Answer 1

Question

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

B.

To determine

To compute: The current ratio for three years.

C.

To determine

To compute: The quick ratio for three years.

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

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Answer 2

Question

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

B.

To determine

To compute: The current ratio for three years.

C.

To determine

To compute: The quick ratio for three years.

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

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Answer 3

Question

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

B.

To determine

To compute: The current ratio for three years.

C.

To determine

To compute: The quick ratio for three years.

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

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Answer 4

Question

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

B.

To determine

To compute: The current ratio for three years.

C.

To determine

To compute: The quick ratio for three years.

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

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Answer 5

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

B.

To determine

To compute: The current ratio for three years.

C.

To determine

To compute: The quick ratio for three years.

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

Answer 6

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

Answer 7

Chapter 10, Problem 2ADM

A.

To determine

Ratio analysis

It is the financial analysis tool for measuring the profitability, liquidity, capability and overall performance of a company.

Following are the two measures of liquidity:

1. Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities. The ideal current ratio is 2:1.

2. Quick ratio: Quick ratio measures the immediate debt paying capacity of a business, which can be measured by dividing quick assets by the current liabilities. Quick assets represent cash, readily marketable securities, and accounts receivable.

3. Working capital: Total current assets minus total current liabilities are the working capital of a company.

To compute: The working capital for three years.

Answer 8

B.

To determine

To compute: The current ratio for three years.

Answer 9

B.

To determine

To compute: The current ratio for three years.

Answer 10

C.

To determine

To compute: The quick ratio for three years.

Answer 11

C.

To determine

To compute: The quick ratio for three years.

Answer 12

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

Answer 13

D.

To determine

To interpret: The short-term liquidity for three years from Part C.

Answer 14

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

Answer 15

E.

To determine

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

Answer 16

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Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQ Ch. 10 - Prob. 4DQ Ch. 10 - Prob. 5DQ Ch. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQ Ch. 10 - Prob. 8DQ Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ

Solution Summary: The author explains the two measures of liquidity: Current ratio and Quick ratio, which measure the immediate debt paying capacity of a business.

To compute: The current ratio for three years.

To compute: The quick ratio for three years.

To interpret: The short-term liquidity for three years from Part C.

To identify: Whether two measures of Part A and Part B is consistent with analysis done in Part D.

Chapter 10 Solutions