Financial & Managerial Accounting
14th Edition
ISBN: 9781337119207
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Chapter 10, Problem 3ADM
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 Explain: That the working capital is a good measure of relative liquidity in comparing the two companies.
B.
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 quick ratio for each company.
C.
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 interpret: The results of quick ratio.
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Students have asked these similar questions
Accounts payable $466,000Notes payable $250,000Current liabilities $716,000Long-term debt $1,166,000Common equity $4,883,000Total liabilities and equity $6,765,000
a. What percentage of the firm's assets does the firm finance using debt (liabilities)?
b. If Campbell were to purchase a new warehouse for
$1.1
million and finance it entirely with long-term debt, what would be the firm's new debt ratio?
Question content area bottom
Part 1
a. What percentage of the firm's assets does the firm finance using debt (liabilities)?
The fraction of the firm's assets that the firm finances using debt is
27.827.8%.
(Round to one decimal place.)
Part 2
b. If Campbell were to purchase a new warehouse for
$1.1
million and finance it entirely with long-term debt, what would be the firm's new debt ratio?
The new debt ratio will be
enter your response here%.
(Round to one decimal place.)
Taft Technologies has the following relationships:
Annual sales 1,200,000.00
Current liabilities 375,000.00
Days sales outstanding (DSO) (365-day year) 40
Inventory turnover ratio 4.8
Current ratio 1.2
The company’s current assets consist of cash, inventories, and accounts receivable. How much cash
does Taft have on its balance sheet?
Alpesh
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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