(A) Adequate information: Cost of goods sold - $2850000 Opening inventory - $480000 Closing inventory - $490000 To calculate inventory turnover ratio Introduction: Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

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Answer 1

Question

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

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Answer 2

Question

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

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Answer 3

Question

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

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Answer 4

Question

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

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Answer 5

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

Answer 6

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Answer 7

Chapter 14, Problem 1PS

Summary Introduction

(A)

Adequate information:

Cost of goods sold - $2850000

Opening inventory - $480000

Closing inventory - $490000

To calculate inventory turnover ratio

Introduction:

Inventory turnover ratio is a turnover ratio which shows how inventory is managed by dividing cost of goods sold by average inventory. It measures the number of times a company sold its average inventory during a year.

Answer 8

Expert Solution

Explanation of Solution

Calculation of Inventory turnover ratio

Inventory turnover ratio = Cost of goods sold _________________________________ ( opening inventory +closing inventory) / 2 = $2850000 ___________________ ( $480000+$490000) / 2 = 5.87 times

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

The inventory turnover ratio of Heifer Sports Inc. is 5.87 times.

Answer 13

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Answer 14

Summary Introduction

(B)

Adequate information:

Shareholder's equity - $960000

Total Liabilities= − $4300000 − $960000 = $3340000

Introduction:

The debt-equity ratio is a financial ratio which measures the financial health of the company. It shows relative contribution of capital by creditors with the contribution by equity shareholders.

Answer 15

Expert Solution

Explanation of Solution

Calculation of Debt-Equity ratio

Debt−equity ratio = Total liabilities / shareholders equity = $3340000 / $960000 = 3.48

Answer 16

Expert Solution

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Conclusion

The debt-equity ratio of Heifer Sports Inc. is 3.48.

Answer 20

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Answer 21

Summary Introduction

(C)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income (including depreciation & amortization) + Changes in working capital.

Answer 22

Expert Solution

Explanation of Solution

Statement of cash flow from operating activities

Particulars

Amount (In $)

Net Income

Changes in accounts receivable ($690000 - $660000)

Changes in inventories ($480000 - $490000)

Changes in accounts payable ($450000 - $340000)

410000

30000

(10000)

110000

Cash Flow from Operating Activities

540000

Answer 23

Expert Solution

Answer 24

Expert Solution

Answer 25

Expert Solution

Answer 26

Conclusion

The cash flow from operating activities for Heifer Sports Inc. is $540000

Answer 27

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Answer 28

Summary Introduction

(D)

Adequate information:

Sales - $5500000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Introduction:

The average collection period is the average time lag for a business between the date of sale and the date of payment owed in terms of accounts receivables. It is expressed as:

Average collection period = 365 / receivables turnover ratio

Where receivable turnover ratio = Net credit sales / average accounts receivables

Answer 29

Expert Solution

Explanation of Solution

Receivables turnover ratio = Net credit sales / Average accounts receivables = $5500000 _________________ ( $690000+$660000)/2 = 8.1

Now Average collection period

Answer 30

Expert Solution

Answer 31

Expert Solution

Answer 32

Expert Solution

Answer 33

Conclusion

The average collection period for Heifer Sports Inc. is 45 days approximately.

Answer 34

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Answer 35

Summary Introduction

(E)

Adequate information:

Sales - $5500000

Total assets for year ending 2014 - $4010000

Total assets for year ending 2015 - $4300000

Introduction:

Assets turnover ratio is a financial ratio which measures the ability of the firm to generate sales from its total assets. It is denoted as Net sales / average total assets.

Answer 36

Expert Solution

Explanation of Solution

Assets Turnover Ratio = Net Sales _______________________ Average total assets = $5500000 ___________________ ( $4010000+$4300000)/2 = 1.32 times

Answer 37

Expert Solution

Answer 38

Expert Solution

Answer 39

Expert Solution

Answer 40

Conclusion

The assets turnover ratio for Heifer Sports Inc. is 1.32 times.

Answer 41

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Answer 42

Summary Introduction

(F)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Interest coverage ratio is a profitability ratio which determines the ability of the company to pay interest on its outstanding debt. It is calculated by dividing earnings before interest and taxes by interest expense.

Answer 43

Expert Solution

Explanation of Solution

Interest Coverage ratio = Earnings before interest and taxes _____________________________ Interest Expense = $870000 ________ $130000 = 6.7 times

Answer 44

Expert Solution

Answer 45

Expert Solution

Answer 46

Expert Solution

Answer 47

Conclusion

The interest coverage ratio for Heifer Sports Inc. is 6.7 times.

Answer 48

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Answer 49

Summary Introduction

(G)

Adequate information:

EBIT or Earnings before interest and taxes - $870000

Sales - $5500000

Introduction:

Operating profit margin measures the profit a company makes on sales after paying for variable cost of production but before paying interest and taxes. It is calculated by dividing a company's operating profit by its net sales.

Answer 50

Expert Solution

Explanation of Solution

Operating profit margin = Operating profit or EBIT _____________________ Net sales = $870000 _________ × 100 $5500000 = 16 %

Answer 51

Expert Solution

Answer 52

Expert Solution

Answer 53

Expert Solution

Answer 54

Conclusion

The operating profit margin for Heifer Sports Inc. is 16%.

Answer 55

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Answer 56

Summary Introduction

(H)

Adequate information:

Net Income - $410000

Shareholder's equity - $960000 Introduction: It measures the financial performance of the company by focusing only on the profitability of equity investments. It is expressed as:

Return on Equity = Net IncomeShareholder's equity

Answer 57

Expert Solution

Explanation of Solution

Calculation of return on equity.

Return on Equity = Net IncomeShareholder's equity

= $410000 $960000 ×100 =43%

Answer 58

Expert Solution

Answer 59

Expert Solution

Answer 60

Expert Solution

Answer 61

Conclusion

The return on equity for Heifer Sports Inc. is 43%.

Answer 62

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Answer 63

Summary Introduction

(I)

Adequate information:

Assets - $4300000

Equity - $960000

EBIT or Earnings before interest and taxes - $870000

Interest expense - $130000

Introduction:

Compound leverage factor is denoted as interest coverage X leverage ratio where

Leverage ratio = Assets Debt

_ = 1 +_

Equity Equity

Answer 64

Expert Solution

Explanation of Solution

Calculation of leverage ratio

Leverage ratio = Assets/ equity

= $4300000 $960000 = 4.47

Compound leverage ratio = interest coverage ratio * leverage ratio

=$870000$130000×4⋅47=30%

Answer 65

Expert Solution

Answer 66

Expert Solution

Answer 67

Expert Solution

Answer 68

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000

Conclusion

The net cash provided by operating activities for Heifer Sports Inc. is $540000

Answer 69

Summary Introduction

(J)

Adequate information:

Net Income - $410000

Accounts receivables for year ending 2014 - $690000

Accounts receivables for year ending 2015 - $660000

Inventory for year ending 2014 - $480000

Inventory for year ending 2015 - $490000

Accounts payable for year ending 2014 - $450000

Accounts payable for year ending 2015 - $340000

Introduction:

The statement of cash flows shows cash flow from operations is adequate for dividend payments at sustainable levels. It is an evidence for well being of the company.

It is denoted as Net income(including depreciation & amortization) + Changes in working capital.

Answer 70

Expert Solution

Explanation of Solution

Statement of cashflow from operatingactivities

ParticularsAmount ( In $) Net Income + Changes in accounts receivable ( $690000 − $660000 ) + Changes in inventories ( $480000 − $490000 ) +Changes in accounts payable ( $450000 − $340000 ) 410000 30000 ( 10000 ) 110000Cash Flow from Operating Activities540000