Compute Ratios for the given companies using the given financial statements.

Question

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Answer 1

Question

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

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Answer 2

Question

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

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Answer 3

Question

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

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Answer 4

Question

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

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Answer 5

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

Answer 6

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

Answer 7

Chapter 13, Problem 4P

1.

To determine

Compute Ratios for the given companies using the given financial statements.

Answer 8

1.

Expert Solution

Explanation of Solution

Calculate the ratios for Company BW

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$45,000($148,000 + $29,000 + $61,000)	18.91%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$45,000$402,000	11.19%
Gross profit percentage	Gross ProfitNet Sales Revenue	($447,000 − $241,00)$447,000	7.72%
Net profit margin	Net IncomeNet Sales Revenue	$45,000$447,000	10.07%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$45,000($148,000 ÷ $10 per Share)	$3.04
Total asset turnover	Net Sales RevenueAverage Total Assets	$447,000$402,000	1.11
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$447,000$140,000	3.19
Receivables turnover	Net Credit Sales Average Net Receivables	$149,000$38,000	3.92
Inventory turnover	Cost of Goods SoldAverage Inventory	$241,000$99,000	2.43
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($41,000 + $38,000 + $99,000)$99,000	1.8
Quick ratio	Quick AssetsCurrent Liabilities	($41,000 + $38,000)$99,000	0.8
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$41,000$99,000	0.41
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($99,000 + $65,000)($148,000 + $29,000 + $61,000)	0.69
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$22$3.04	7.24
Dividend yield ratio	Dividend per Share Market Price per Share	($33,000 ÷ 14,800 Shares)$22	10.14%

Table (1)

Calculate the ratios for Company PF

Ratio	Formula	Calculation	Result
Profitability ratios
Return on Equity (ROE)	Net IncomeAverage Total Stockholder' Equity	$91,000($512,000 + $106,000 + $71,000)	13.21%
Return on Assets (ROA)	Net IncomeAverage Total Assets	$91,000$798,000	11.40%
Gross profit percentage	Gross ProfitNet Sales Revenue	($802,000 − $400,00)$802,000	50.13%
Net profit margin	Net IncomeNet Sales Revenue	$91,000$802,000	11.35%
Earnings per share (EPS)	Net Income(Weighted Average Number of common Shares Outstanding)	$91,000($512,000 ÷ $10 per Share)	$1.78
Total asset turnover	Net Sales RevenueAverage Total Assets	$802,000$798,000	1.01
Fixed asset turnover	Net Sales RevenueAverage Net Fixed Assets	$802,000$401,000	2.0
Receivables turnover	Net Credit Sales Average Net Receivables	$267,333$31,000	8.62
Inventory turnover	Cost of Goods SoldAverage Inventory	$400,000$40,000	10.00
Liquidity ratios
Current ratio	Current AssetsCurrent Liabilities	($21,000 + $31,000 + $40,000)$49,000	1.88
Quick ratio	Quick AssetsCurrent Liabilities	($21,000 + $31,000)$49,000	1.06
Cash ratio	Cash & Cash EquivalentsCurrent Liabilities	$21,000$49,000	0.43
Solvency ratio
Debt-to-equity ratio	Total LiabilitiesTotal Stockholder's Equity	($49,000 + $60,000)($512,000 + $106,000 + $71,000)	0.16
Market ratios
Price/Earnings (P/E) ratio	Market Price per ShareEarnings per Share	$15($91,000 ÷ 51,200 shares)	8.43
Dividend yield ratio	Dividend per Share Market Price per Share	($148,000 ÷ 51,200 shares)$15	19.27%

Table (2)

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.

Answer 13

2.

To determine

Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.

Answer 14

2.

Expert Solution

Answer to Problem 4P

Company PF is the more efficient at collecting its accounts receivables and turning over its inventory.

Answer 15

2.

Expert Solution

Answer 16

2.

Expert Solution

Answer 17

Expert Solution

Answer 18

Explanation of Solution

Company BW collecting its accounts receivable at 3.92 times a year and turns over its inventory 2.43 times a year. Whereas company PF is collecting its account receivables at 8.62 times a year and turns over its inventory 10 times a year.

Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.