Connect 1 Semester Access Card for Fundamentals of Financial Accounting

5th Edition

ISBN: 9781259128547

Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby

Publisher: McGraw-Hill Education

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Textbook Question

Chapter 13, Problem 13.5PB

Interpreting Profitability, Liquidity, Solvency, and P/E Ratios

Mattel and Hasbro are the two biggest makers of games and toys in the world. Mattel sells over $6 billion of products each year while annual sales of Hasbro products exceed $4 billion. Compare the two companies as a potential investment based on the following ratios:

Ratio	Mattel	Hasbro
Gross profit percentage	53.7%	58.1%
Net profit margin	13.9%	10.0%
Return on equity	28.4%	18.0%
EPS	$2.59	$2.16
Receivables turnover ratio	5.2	3.8
Inventory turnover ratio	5.8	5.0
Current ratio	3.22	1.82
Debt-to-assets	0.25	0.32
P/E ratio	15.4	25.6

Required:

1. Which company appears more profitable? Describe the ratio(s) that you used to reach this decision.
2. Which company appears more liquid? Describe the ratio(s) that you used to reach this decision.
3. Which company appears more solvent? Describe the ratio(s) that you used to reach this decision.
4. Are the conclusions from your analyses in requirements 1–3 consistent with the value of the two companies, as suggested by their P/E ratios? If not, offer one explanation for any apparent inconsistency.

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Chapter 13, Problem 13.4PB

Chapter 13, Problem 13.6PB

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Chapter 13 Solutions

Connect 1 Semester Access Card for Fundamentals of Financial Accounting

Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2Q Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5Q Ch. 13 - Prob. 6Q Ch. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...

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Solution Summary: The author explains Gross Profit Percentage, Net Profit Margin, Return on Equity, Receivables turnover ratio, and Current Ratio.

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Chapter 13 Solutions