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(a) Current ratio
Inventory Turnover: It is a part of efficiency ratios used during the process of ratio analysis. It reflects the number of times a company’s inventory is converted into sale during a particular period. The cost of goods sold is divided by average inventory to get the value of inventory turnover.
Profit Margin: Profit margin reflects the portion of net income in the net sales. It is a profitability measure tool that is used to evaluate the net income a business earns on every dollar of net sales. It is computed as net income divided by net revenue.
Return on Total Assets: It is a measure to evaluate the efficiency of company’s assets. It reports the profit earned as the percentage of total assets used in the business. A company’s
The rate of Return on Common
Debt to Assets Ratio: It is the ratio between total assets of the company and the total liabilities. Debt ratio reflects the finance strategy of the company. It is used to evaluate company’s ability to pay its debts. Higher debt ratio implies the higher financial risk.
Times Interest Earned Ratio: It’s a measure to evaluate the net income for interest payment on the debt of a company. It is a part of solvency ratios.
To compute: Current ratio for 2016 and 2017.
(b)
To compute: Inventory turnover
(c)
To compute: Profit margin
(d)
To compute: Return on assets
(e)
To compute: Return on common stockholder’s equity
(f)
To compute: Debt to assets ratio
(g)
To compute: Times interest earned
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Chapter 14 Solutions
Managerial Accounting: Tools for Business Decision Making
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