Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company. Current ratio : Current ratio is used to determine the relationship between current assets and current liabilities. Formula: Current ratio = Current assets Current liabilities The ideal current ratio is 2:1 Debt ratio: Debt ratio is determined as total liabilities by total assets. It is used by the company to determine the debt amount that is used to finance assets of the company. When the ratio is higher than 50%, then the risk is higher. Formula: Debt ratio = Total liabilities Total assets Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock. Formula: Earnings per share = Net income – Preferred dividends Weighted average number of common shares outstanding Compute of Company ST’s current ratio, debt ratio and earnings per share. To compute: Current ratio, debt ratio and earnings per share

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 15.26AP

Requirement 1

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities.

Formula:

Current ratio=Current assetsCurrent liabilities

The ideal current ratio is 2:1

Debt ratio: Debt ratio is determined as total liabilities by total assets. It is used by the company to determine the debt amount that is used to finance assets of the company. When the ratio is higher than 50%, then the risk is higher.

Formula: Debt ratio=Total liabilitiesTotal assets

Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Formula:

Earnings per share = Net income – Preferred dividendsWeighted average number of common shares outstanding

Compute of Company ST’s current ratio, debt ratio and earnings per share.

To compute: Current ratio, debt ratio and earnings per share

Requirement 2

To determine

To compute: Current ratio, debt ratio, and earnings per share after evaluation of the following transactions:

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Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 15.26AP

Requirement 1

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities.

Formula:

Current ratio=Current assetsCurrent liabilities

The ideal current ratio is 2:1

Debt ratio: Debt ratio is determined as total liabilities by total assets. It is used by the company to determine the debt amount that is used to finance assets of the company. When the ratio is higher than 50%, then the risk is higher.

Formula: Debt ratio=Total liabilitiesTotal assets

Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Formula:

Earnings per share = Net income – Preferred dividendsWeighted average number of common shares outstanding

Compute of Company ST’s current ratio, debt ratio and earnings per share.

To compute: Current ratio, debt ratio and earnings per share

Requirement 2

To determine

To compute: Current ratio, debt ratio, and earnings per share after evaluation of the following transactions:

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 15.26AP

Requirement 1

To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

Current ratio: Current ratio is used to determine the relationship between current assets and current liabilities.

Formula:

Current ratio=Current assetsCurrent liabilities

The ideal current ratio is 2:1

Debt ratio: Debt ratio is determined as total liabilities by total assets. It is used by the company to determine the debt amount that is used to finance assets of the company. When the ratio is higher than 50%, then the risk is higher.

Formula: Debt ratio=Total liabilitiesTotal assets

Earnings per share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.

Formula:

Earnings per share = Net income – Preferred dividendsWeighted average number of common shares outstanding

Compute of Company ST’s current ratio, debt ratio and earnings per share.

To compute: Current ratio, debt ratio and earnings per share

Requirement 2

To determine

To compute: Current ratio, debt ratio, and earnings per share after evaluation of the following transactions:

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 15, Problem 15.26AP

Requirement 1

To determine