
Introduction:
Ratio Analysis
• Ratio analysis is a study of several key metrics of a company based on the data presented in its’ financial statements with an objective to evaluate the financial health of a company.
• It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
• Total Asset Turnover – A measure of the correlation between the Total assets employed and the turnover of the business.
• It seeks to evaluate the volume of sales in relation to the assets employed. It gives an indication of the sales in relation to the investment made in the assets and overall capital contribution to the company in the form of Assets.
• Return on Total Assets – A measure of the total
• It seeks to measure the return earned on the total assets i.e. the resources employed by the business to directly or indirectly increase revenue or reduce costs.
• Net Profit Margin – It is a measure of the total Profit earned from sales after deduction of operating expenses, selling and distribution expenses and other indirect costs.
• It is often the most sought after financial measure to evaluate profitability since it gives a clear indication of the
To Prepare:
Report comparing Roak and Clay companies highlighting their ability to meet current obligations and use current assets efficiently

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Chapter 17 Solutions
Fundamental Accounting Principles
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- Cobalt Distributors processes customer payments at its central office in Denver. The company has an average accounts receivable (A/R) balance of $4.2 million, which is financed through a line of credit at an annual interest rate of 11.8%. Management is evaluating a new lockbox system that is expected to reduce A/R by 19%. The annual cost of operating the lockbox system is $18,500. What is the estimated net annual savings from implementing the lockbox system?arrow_forwardAdam Traders is preparing its cash budget for the month of June. The company estimated credit sales for June at $180,000. Actual credit sales for May were $140,000. Estimated collections in June for credit sales in June are 25%. Estimated collections in June for credit sales in May are 60%. Estimated collections in June for credit sales prior to May are $10,000. Estimated write-offs in June for uncollectible credit sales are $6,000. The estimated provision for bad debts in June for credit sales in June is $5,000. What are the estimated cash receipts from accounts receivable collections in June?arrow_forwardPlease give me true answer this financial accounting questionarrow_forward
- Please see an attachment for details the general accounting question and step by step explanation do fastarrow_forwardWhat would be the value of ending inventory?arrow_forwardA company produces a single product, with a selling price of $12 and a variable cost of $7. Fixed costs are $120,000 per period. What volume of sales in units is needed to earn a profit of $80,000 per period?arrow_forward
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