Explanation Ratio analysis: The analysis of a company using the financial ratios and comparing its trends and measure its performance within the company and the companies of the industry is known as ratio analysis. a. Gross margin percentage: The percentage of gross profit generated by every dollar of net sales is referred to as gross profit percentage. This ratio measures the profitability of a company by quantifying the amount of income earned from sales revenue generated after cost of goods sold are paid. The higher the ratio, the more ability to cover operating expenses. Compute the gross profit percentage: Gross Profit Percentage = Gross Profit Net Sales = $ 183 , 260 $ 531 , 800 = 34.5 % Compute the net sales and the gross profit: Particulars Amount ($) Sales $535,000 Less: Sales Discount $3,200 Net Sales $531,800 Less: Cost of Goods Sold $348,540 Gross Profit $183,260 Table (1) b. Working capital : The measure which evaluates the ability of a company to pay off the short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital. Compute the Working capital: Particulars Amount ($) Amount ($) Current Assets Cash $33,340 Accounts Receivable $47,700 Note Receivable $9,500 Merchandise Inventory $35,700 Prepaid Insurance $2,350 Supplies $1,410 Total Current Assets (A) $130,000 Current Liabilities Notes Payable $35,700 Accounts payable $2,350 Interest Payable $1,410 Total Current Assets (B) $39,460 Working Capital ( A − B ) $90,540 Table (2) c. Current ratio : Current ratio is one of the liquidity ratios , which measures the capacity of the company to meet its short-term obligations using its current assets. Current ratio is calculated by using the formula: Current ratio = Current Assets Current Liabilities Compute the current ratio: Current ratio = Current Assets Current Liabilities = $ 130 , 000 $ 48 , 400 = 2

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Ch. 13 - Why are financial statements prepared in...Ch. 13 - What is the distinction between current...Ch. 13 - Prob. 1.3SRQ Ch. 13 - Which of the following is not a current asset? a....Ch. 13 - How should purchases returns and allowances be...Ch. 13 - Assume that a business listed the Freight In...Ch. 13 - Why do adjusting entries need detailed...Ch. 13 - Which adjusting entries should be reversed?Ch. 13 - Prob. 2.3SRQ Ch. 13 - A reversing entry is made for an end-of-period...

Ch. 13 - Prob. 2.5SRE Ch. 13 - At the end of the previous accounting period, an...Ch. 13 - Prob. 1CSR Ch. 13 - Prob. 2CSR Ch. 13 - Prob. 3CSR Ch. 13 - Prob. 4CSR Ch. 13 - Which of the following should have a debit balance...Ch. 13 - Prob. 6CSR Ch. 13 - Prob. 7CSR Ch. 13 - Prob. 1DQ Ch. 13 - Prob. 2DQ Ch. 13 - What are operating expenses?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 - Gomez Company had a current ratio of 2.0 in 2018...Ch. 13 - Prob. 1E Ch. 13 - Prob. 2E Ch. 13 - The worksheet of Bridgets Office Supplies contains...Ch. 13 - Prob. 4E Ch. 13 - Prob. 5E Ch. 13 - Prob. 6E Ch. 13 - Prob. 7E Ch. 13 - The Adjusted Trial Balance section of the...Ch. 13 - Prob. 9E Ch. 13 - Prob. 10E Ch. 13 - Superior Hardwood Company distributes hardwood...Ch. 13 - Good to Go Auto Products distributes automobile...Ch. 13 - Obtain all data necessary from the worksheet...Ch. 13 - Obtain all data that is necessary from the...Ch. 13 - Prob. 5PA Ch. 13 - ComputerGeeks.com is a retail store that sells...Ch. 13 - Hog Wild is a retail firm that sells motorcycles,...Ch. 13 - Prob. 3PB Ch. 13 - Prob. 4PB Ch. 13 - The data below concerns adjustments to be made at...Ch. 13 - Programs Plus is a retail firm that sells computer...Ch. 13 - Teagan Fitzgerald is the owner of Newport Jewelry,...Ch. 13 - Prob. 1MF Ch. 13 - Spectrum Company had an increase in sales and net...Ch. 13 - Prob. 3MF Ch. 13 - Prob. 4MF Ch. 13 - Prob. 5MF Ch. 13 - Prob. 6MF Ch. 13 - Prob. 7MF Ch. 13 - It is standard accounting procedures, or GAAP, to...Ch. 13 - McCormick Company, Incorporated, is a global...Ch. 13 - The Fashion Rack is a retail merchandising...

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Compute the required ratios.

Solution Summary: The author explains the ratio analysis of a company using financial ratios and comparing its trends and measuring its performance within the company and the companies of the industry.

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Compute the required ratios.

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