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1.
Compute Ratios for the given companies using the given financial statements.
1.
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Explanation of Solution
Calculate the ratios for Company BW
Ratio | Formula | Calculation | Result |
Profitability ratios | |||
Return on Equity (ROE) | 18.91% | ||
Return on Assets (ROA) | 11.19% | ||
Gross profit percentage | 7.72% | ||
Net profit margin | 10.07% | ||
Earnings per share (EPS) | $3.04 | ||
Total asset turnover | 1.11 | ||
Fixed asset turnover | 3.19 | ||
Receivables turnover | 3.92 | ||
Inventory turnover | 2.43 | ||
Liquidity ratios | |||
Current ratio | 1.8 | ||
Quick ratio | 0.8 | ||
Cash ratio | 0.41 | ||
Solvency ratio | |||
Debt-to-equity ratio | 0.69 | ||
Market ratios | |||
Price/Earnings (P/E) ratio | 7.24 | ||
Dividend yield ratio | 10.14% |
Table (1)
Calculate the ratios for Company PF
Ratio | Formula | Calculation | Result |
Profitability ratios | |||
Return on Equity (ROE) | 13.21% | ||
Return on Assets (ROA) | 11.40% | ||
Gross profit percentage | 50.13% | ||
Net profit margin | 11.35% | ||
Earnings per share (EPS) | $1.78 | ||
Total asset turnover | 1.01 | ||
Fixed asset turnover | 2.0 | ||
Receivables turnover | 8.62 | ||
Inventory turnover | 10.00 | ||
Liquidity ratios | |||
Current ratio | 1.88 | ||
Quick ratio | 1.06 | ||
Cash ratio | 0.43 | ||
Solvency ratio | |||
Debt-to-equity ratio | 0.16 | ||
Market ratios | |||
Price/Earnings (P/E) ratio | 8.43 | ||
Dividend yield ratio | 19.27% |
Table (2)
2.
Identify the company that is more efficient at collecting its accounts receivables and turning over its inventory.
2.
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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
Hence, Company PF is more efficient at collecting its accounts receivables and turning over its inventory.
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Chapter 13 Solutions
Financial Accounting
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