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Business Accounting Financial Accounting: Information for Decisions

1. Introduction : Current ratio is calculated to know whether its current assets are sufficient to pay off its current liabilities in a particular period of time. It is calculated by dividing current assets by current liabilities. To determine : The current ratio for the years 2018, 2017 and 2016. Current ratio for the year 2018 is 2.3:1 Current ratio for the year 2017 is 1.9:1 Current ratio for the year 2016 is 2.5:1 Computation of current ratio: 2018 : Current ratio = current assets current laibilities = $52,390 $22,800 =2 .2978 or, 2 .3:1 2017: Current ratio = current assets current laibilities = $37,924 $19,960 =1 .9 or, 1 .9:1 2016: Current ratio = current assets current laibilities = $51,748 $20,300 =2 .5491 or, 2 .5:1 2. Introduction : Common size statement presents information in percentages with a common base that lets the user helps in comparison to financial information and analyzing its performance over several years. It also helps in the study of trends in different line items. To determine : The income statement as common size percent The common size percent for comparative income statement is as follows: Computation of common size percentages: 3. Introduction : Trend analysis is the horizontal analysis of any particular data given for different periods of time. Trend analysis helps a company to derive trends across several years which in turn enables an entity to measure its performance throughout the years To determine : The balance sheet as trend percentage using 2016 as base year The trend percent for comparative balance sheet using 2016 as base year is as follows: Computation of trend percentages: 4. Introduction : Current ratio is calculated to know whether its current assets are sufficient to pay off its current liabilities in a particular period of time. It is calculated by dividing current assets by current liabilities. Common size statement presents information in percentages with a common base that lets user helps in comparison of financial information and its analyzing its performance over the several years. It also helps in the study of trends in different line items. Trend analysis is the horizontal analysis of any particular data given for different periods of time. Trend analysis helps a company to derive trends across several years which in turn enables an entity to measure its performance throughout the years. To determine : The significant revelations by percentages and ratios computed The company has maintained a current ratio of more than one. The Cost of Goods Sold has increased significantly in one year. The net profit of the company is the highest in 2018. The company has made sold of long term investments in 2018. The company’s retained earning has also increased substantially. Throughout the years, the company has been able to maintain a current ratio of more than one which means that it has sufficient assets to pay off its liabilities, current ratios for the year 2016, 2017 and 2018 are 2.5, 1.9 and 2.3 respectively. The cost of goods sold increased in 2017 to 62.5% but decreased in 2016 and 2018 to 55.36% and 51.08% respectively. Out of the three years, the net profit of the company is highest in 2018 at 13.90%. In 2018, the company has fully sold its long term investments of $500, hence a decrease in current assets. Throughout the years, the company has sold its investments therefore a substantial increasein its retained earnings , in 2018 its retained earnings stood at 165.28%.

1. Introduction : Current ratio is calculated to know whether its current assets are sufficient to pay off its current liabilities in a particular period of time. It is calculated by dividing current assets by current liabilities. To determine : The current ratio for the years 2018, 2017 and 2016. Current ratio for the year 2018 is 2.3:1 Current ratio for the year 2017 is 1.9:1 Current ratio for the year 2016 is 2.5:1 Computation of current ratio: 2018 : Current ratio = current assets current laibilities = $52,390 $22,800 =2 .2978 or, 2 .3:1 2017: Current ratio = current assets current laibilities = $37,924 $19,960 =1 .9 or, 1 .9:1 2016: Current ratio = current assets current laibilities = $51,748 $20,300 =2 .5491 or, 2 .5:1 2. Introduction : Common size statement presents information in percentages with a common base that lets the user helps in comparison to financial information and analyzing its performance over several years. It also helps in the study of trends in different line items. To determine : The income statement as common size percent The common size percent for comparative income statement is as follows: Computation of common size percentages: 3. Introduction : Trend analysis is the horizontal analysis of any particular data given for different periods of time. Trend analysis helps a company to derive trends across several years which in turn enables an entity to measure its performance throughout the years To determine : The balance sheet as trend percentage using 2016 as base year The trend percent for comparative balance sheet using 2016 as base year is as follows: Computation of trend percentages: 4. Introduction : Current ratio is calculated to know whether its current assets are sufficient to pay off its current liabilities in a particular period of time. It is calculated by dividing current assets by current liabilities. Common size statement presents information in percentages with a common base that lets user helps in comparison of financial information and its analyzing its performance over the several years. It also helps in the study of trends in different line items. Trend analysis is the horizontal analysis of any particular data given for different periods of time. Trend analysis helps a company to derive trends across several years which in turn enables an entity to measure its performance throughout the years. To determine : The significant revelations by percentages and ratios computed The company has maintained a current ratio of more than one. The Cost of Goods Sold has increased significantly in one year. The net profit of the company is the highest in 2018. The company has made sold of long term investments in 2018. The company’s retained earning has also increased substantially. Throughout the years, the company has been able to maintain a current ratio of more than one which means that it has sufficient assets to pay off its liabilities, current ratios for the year 2016, 2017 and 2018 are 2.5, 1.9 and 2.3 respectively. The cost of goods sold increased in 2017 to 62.5% but decreased in 2016 and 2018 to 55.36% and 51.08% respectively. Out of the three years, the net profit of the company is highest in 2018 at 13.90%. In 2018, the company has fully sold its long term investments of $500, hence a decrease in current assets. Throughout the years, the company has sold its investments therefore a substantial increasein its retained earnings , in 2018 its retained earnings stood at 165.28%.

Solution Summary: The author explains the current ratio, which is calculated by dividing current assets by current liabilities.

Financial Accounting: Information for Decisions

Financial Accounting: Information for Decisions

9th Edition

ISBN: 9781260158809

Author: Wild, John

Publisher: MCGRAW-HILL HIGHER EDUCATION

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Financial Accounting: Information for Decisions

Ch. 13 - Explain the difference between financial reporting...Ch. 13 - Prob. 2DQ Ch. 13 - Prob. 3DQ Ch. 13 - Prob. 4DQ Ch. 13 - Prob. 5DQ Ch. 13 - Prob. 6DQ Ch. 13 - Prob. 7DQ Ch. 13 - Prob. 8DQ Ch. 13 - Prob. 9DQ Ch. 13 - Prob. 10DQ

Ch. 13 - Prob. 11DQ Ch. 13 - Prob. 12DQ Ch. 13 - Prob. 13DQ Ch. 13 - Prob. 14DQ Ch. 13 - Prob. 15DQ Ch. 13 - Prob. 16DQ Ch. 13 - Prob. 17DQ Ch. 13 - Prob. 1QS Ch. 13 - Prob. 2QS Ch. 13 - Prob. 3QS Ch. 13 - Prob. 4QS Ch. 13 - Prob. 5QS Ch. 13 - Prob. 6QS Ch. 13 - Prob. 7QS Ch. 13 - Prob. 8QS Ch. 13 - Which of the following gains or losses would...Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - Prob. 3E Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - Prob. 10E Ch. 13 - Prob. 12E Ch. 13 - Prob. 13E Ch. 13 - Prob. 14E Ch. 13 - Prob. 15E Ch. 13 - Prob. 16E Ch. 13 - Prob. 1PSA Ch. 13 - Prob. 2PSA Ch. 13 - Prob. 3PSA Ch. 13 - Prob. 5PSA Ch. 13 - Prob. 6PSA Ch. 13 - Selected comparative financial statements of...Ch. 13 - Prob. 2PSB Ch. 13 - Prob. 3PSB Ch. 13 - Prob. 5PSB Ch. 13 - Prob. 6PSB Ch. 13 - Prob. 13SP Ch. 13 - Prob. 2FSA Ch. 13 - Prob. 3FSA Ch. 13 - Prob. 1BTN Ch. 13 - Prob. 5BTN

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