1) Introduction: Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments. To determine: The current ratio of the given company

Question

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Answer 1

Question

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

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Answer 2

Question

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

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Answer 3

Question

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

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Answer 4

Question

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

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Answer 5

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

Answer 6

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

Answer 7

Chapter 17, Problem 4APSA

To determine

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

Answer 8

Expert Solution

Answer to Problem 4APSA

Solution:

The current ratio is 3.62

Answer 9

Expert Solution

Answer 10

Expert Solution

Answer 11

Expert Solution

Answer 12

Explanation of Solution

Explanation:

Current Ratio = $\frac{c u r r e n t a s s e t s}{c u r r e n t l i a b i l i t i e s}$

Current Assets include

Cash	10000
Short-term investment	8400
Accounts Receivable	29200
Notes Receivable	4500
Merchandise Inventory	32150
Prepaid Expenses	2650
Total Current Assets	86900

Current liabilities Include

Accounts Payable	17500
Accrued Wages Payable	3200
Income Taxes Payable	3300
Total Current liabilities	24000

So, Current Ratio= $\frac{86900}{24000}$ =3.62

Answer 13

Conclusion

Conclusion:

The Current Ratio of 3.62 indicates that the company’s liquidity position is strong and it is able to meet its short-term payment requirements.

Answer 14

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

Answer 15

To determine

2)

Introduction:

The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets.

Quick Ratio= $\frac{Q u i c k a s s e t s}{C u r r e n t l i a b i l i t i e s}$ .

To determine:

The Acid Test Ratio of the given company

Answer 16

Expert Solution

Answer to Problem 4APSA

Solution:

The Acid Test Ratio is 2.2 :1

Answer 17

Expert Solution

Answer 18

Expert Solution

Answer 19

Expert Solution

Answer 20

Explanation of Solution

Explanation:

Quick Assets= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{}$

Quick Ratio= $\frac{C a s h + S h o r t - t e r m i n v e s t m e n t + A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{C u r r e n t l i a b i l i t i e s}$

= $\frac{10000 + 8400 + 29200 + 4500}{24000}$

= $\frac{52100}{24000}$ = 2.2 :1

Answer 21

Conclusion

Conclusion:

The Acid Test ratio of 2.2 :1 indicates that the company is highly liquid and able to repay its short-term cash payment obligations easily

Answer 22

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

Answer 23

To determine

3)

Introduction:

Days sales uncollected implies the number of days the sales made by the company will not be collected from the accounts receivables. The debtors balance including the value of trade notes are divided by the net sales during the year and then multiplied with 365 days to calculate the days’ sales uncollected.

To determine:

The days’ sales uncollected of the given company

Answer 24

Expert Solution

Answer to Problem 4APSA

Solution:

The day’s sales uncollected is 27.4 days

Answer 25

Expert Solution

Answer 26

Expert Solution

Answer 27

Expert Solution

Answer 28

Explanation of Solution

Explanation:

Given that,

Net Sales = 448600

Accounts Receivable = 29200

Notes Receivable= 4500

So, day’s sales uncollected= $\frac{A c c o u n t s R e c e i v a b l e + N o t e s R e c e i v a b l e}{N e t S a l e s}$ *365

= $\frac{29200 + 4500}{448600}$ * 365 = $\frac{33700}{448600}$ *365 = 27.4 days

Answer 29

Conclusion

Conclusion:

Hence, the days’ sales uncollected are 27.4 days which indicates that the revenue from sales is collected within 28 days of sales.

Answer 30

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

Answer 31

To determine

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

Answer 32

Expert Solution

Answer to Problem 4APSA

Solution:

The inventory turnover ratio is 7.3

Answer 33

Expert Solution

Answer 34

Expert Solution

Answer 35

Expert Solution

Answer 36

Explanation of Solution

Explanation:

Cost of goods sold= 297250

Closing Inventory= 32150.

opening Inventory= 48900.

Average Inventory= $\frac{C l o s i n g I n v e n t o r y + o p e n i n g i n v e n t o r y}{2}$ =40525

So, Inventory turnover ratio= $\frac{C o s t o f g o o d s s o l d}{A v e r a g e I n v e n t o r y}$ = $\frac{297250}{40525}$ =7.3

Answer 37

Conclusion

Conclusion:

Hence the inventory turnover ratio shows that the inventory is sold and gets replaced in 7.3 days

Answer 38

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

Answer 39

To determine

5)

Introduction:

The Days sales in Inventory show the number of days the company takes to convert its inventory into sales. The closing Inventory is divided by the cost of goods sold and multiplied with 365 days to calculate the days sales in Inventory.

To determine:

The Days sales in Inventory of the given company.

Answer 40

Expert Solution

Answer to Problem 4APSA

Solution:

The Days sales in Inventory is 39.5 days.

Answer 41

Expert Solution

Answer 42

Expert Solution

Answer 43

Expert Solution

Answer 44

Explanation of Solution

Explanation:

Closing Inventory= 32150.

cost of goods sold=297250

Days Sales in Inventory= $\frac{C l o s i n g I n v e n t o r y}{c o s t o f g o o d s s o l d} * 365$

= $\frac{32150.}{297250} * 365$ = 39.5 days.

Answer 45

Conclusion

Conclusion:

Hence, it takes about 39.5 days for the company to convert its inventory into sales.

Answer 46

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

Answer 47

To determine

6)

Introduction:

The debt to equity ratio shows the financial leverage of the company. It shows the ratio of assets of the company financed by debt in comparison to equity. It is indicative of the financial wellbeing of the company and a growing debt-equity ratio indicates that the company is increasingly using external sources of funds rather than internal sources and might be a warning signal.

To determine:

The debt-equity ratio of the given company.

Answer 48

Expert Solution

Answer to Problem 4APSA

Solution:

The debt-equity ratio is 0.41

Answer 49

Expert Solution

Answer 50

Expert Solution

Answer 51

Expert Solution

Answer 52

Explanation of Solution

Explanation:

Debt here is Long term notes Payable secured by mortgage on plant assets= 63400

Equity = $(C o m m o n s t o c k + R e t a i n e d E a r n i n g s)$ = 90000+ 62800=152800

Hence, debt-equity ratio = $\frac{D e b t}{E q u i t y}$ = $\frac{63400}{152800}$ =0.41

Answer 53

Conclusion

Conclusion:

Thus, the company has a debt-equity ratio of 0.41 which reflects that equity financing is more than debt financing.

Answer 54

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

Answer 55

To determine

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

Answer 56

Expert Solution

Answer to Problem 4APSA

Solution:

The times interest earned is 12.9 times

Answer 57

Expert Solution

Answer 58

Expert Solution

Answer 59

Expert Solution

Answer 60

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(G r o s s P r o f i t - O p e r a t i n g e x p e n s e s)$ = 151350- 98600= 52750

Interest expenses= 4100

So, times interest earned = $\frac{52750}{4100}$ =12.9

Answer 61

Conclusion

Conclusion:

Hence, the times interest earned is 12.9

Answer 62

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

Answer 63

To determine

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

Answer 64

Expert Solution

Answer to Problem 4APSA

Solution:

The profit margin ratio is 6.5%

Answer 65

Expert Solution

Answer 66

Expert Solution

Answer 67

Expert Solution

Answer 68

Explanation of Solution

Explanation:

Net Sales= 448600

Net Profit= 29052

Hence, profit margin ratio= $\frac{N e t P r o f i t}{N e t S a l e s}$ = $\frac{29052}{448600}$ =0.065=6.5%

Answer 69

Conclusion

Conclusion:

Hence, for every $100 of sales revenue, the net profit of $6.5 is generated.

Answer 70

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

Answer 71

To determine

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company

Answer 72

Expert Solution

Answer to Problem 4APSA

Solution:

The total asset turnover ratio is 2.1

Answer 73

Expert Solution

Answer 74

Expert Solution

Answer 75

Expert Solution

Answer 76

Explanation of Solution

Explanation:

Opening total assets= 189400

Closing total assets= 240200

Average total assets= $\frac{O p e n i n g t o t a l a s s e t s + C l o s i n g t o t a l a s s e t s}{2}$ = $\frac{189400 + 240200}{2}$ =214800

Net Sales=448600

So, total inventory turnover= $\frac{t h e n e t s a l e s}{\begin{array}{l} a v e r a g e t o t a l a s s e t s . \end{array}}$ = $\frac{448600}{\begin{array}{l} 214800 \end{array}}$ =2.1

Answer 77

Conclusion

Conclusion:

Hence, the inventory turnover ratio is 2.1 times.

Answer 78

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

Answer 79

To determine

10)

Introduction:

Return on total assets shows the efficiency of using the company’s assets in generating profits before the contractual obligations i.e. interest and taxes are paid off. It is calculated by dividing Earnings before interest and tax by average total assets.

To determine:

The Return on Total Assets of the given company.

Answer 80

Expert Solution

Answer to Problem 4APSA

Solution:

The Return on total assets is 24.6%

Answer 81

Expert Solution

Answer 82

Expert Solution

Answer 83

Expert Solution

Answer 84

Explanation of Solution

Explanation:

Earnings before Interest and Taxes= $(I n c o m e b e f o r e t a x + I n t e r e s t e x p e n s e s)$ = 48650+4100= 52750

Average Total Assets as computed above=214800

So, the Return on Total Assets = $\frac{E a r n i n g s b e f o r e i n t e r e s t a n d t a x}{\begin{array}{l} a v e r a g e t o t a l a s s e t s \end{array}}$ = $\frac{52750}{\begin{array}{l} 214800 \end{array}}$ =0.2455 =24.6%

Answer 85

Conclusion

Conclusion:

Hence, the return on total assets is 24.6%

Answer 86

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

Answer 87

To determine

11)

Introduction:

Return on common stockholder’s equity is the measurement of net profit available to the shareholders for investing their equity. The net profit is divided by the average equity to calculate the percentage.

To determine:

The return on common stockholder’s equity for the given period.

Answer 88

Expert Solution

Answer to Problem 4APSA

Solution:

The return on common stockholder’s equity is 21.9%

Answer 89

Expert Solution

Answer 90

Expert Solution

Answer 91

Expert Solution

Answer 92

Explanation of Solution

Explanation:

Net profit =29052

Opening common stock= 90000

Closing common stock = 90000

Opening retained earnings= 22748

Closing retained earnings = 62800

So, Average equity= $\frac{O p e n i n g c o m m o n s t o c k + C l o s i n g c o m m o n s t o c k + O p e n i n g r e t a i n e d e a r n i n g s + C l o s i n g r e t a i n e d e a r n i n g s}{2}$ = $\frac{90000 + 90000 + 22748 + 62800}{2}$ =132774

Return on common stockholder’s equity= $\frac{N e t p r o f i t}{A v e r a g e e q u i t y}$ = $\frac{29052}{132774}$ =21.9%

Answer 93

Conclusion

Conclusion:

Hence, the return on common stockholder’s equity is 21.9%

Answer 94

Ch. 17 - Prob. 1DQ Ch. 17 - What is the difference between comparative...Ch. 17 - Prob. 3DQ Ch. 17 - Prob. 4DQ Ch. 17 - Prob. 5DQ Ch. 17 - Prob. 6DQ Ch. 17 - Prob. 7DQ Ch. 17 - Prob. 8DQ Ch. 17 - Prob. 9DQ Ch. 17 - How does inventory turnover provide information...

1) Introduction: Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments. To determine: The current ratio of the given company

1) Introduction: Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments. To determine: The current ratio of the given company

Answer to Problem 4APSA

Explanation of Solution

2) Introduction: The Acid Test Ratio or the Quick ratio is the liquidity ratio measuring the ability of the company to meet it current liabilities through its quick assets. Quick Ratio= QuickassetsCurrentliabilities. To determine: The Acid Test Ratio of the given company

Answer to Problem 4APSA

Explanation of Solution

Answer to Problem 4APSA

Explanation of Solution

4) Introduction: Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio.. To determine: The inventory turnover of the given company.

Answer to Problem 4APSA

Explanation of Solution

Answer to Problem 4APSA

Explanation of Solution

Answer to Problem 4APSA

Explanation of Solution

7) Introduction: Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses. To determine: The times interest earned for the given company.

Answer to Problem 4APSA

Explanation of Solution

8) Introduction: The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin. To determine: The profit margin ratio of the given company.

Answer to Problem 4APSA

Explanation of Solution

9) Introduction: Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio. To determine: The total asset turnover ratio of the given company

Answer to Problem 4APSA

Explanation of Solution

Answer to Problem 4APSA

Explanation of Solution

Answer to Problem 4APSA

Explanation of Solution

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Chapter 17 Solutions

1)

Introduction:

Current ratio can be defined as the ratio to measure the liquidity of the company which indicates the ability of the company to meet its current or short term payments.

To determine:

The current ratio of the given company

4)

Introduction:

Inventory Turnover ratio measures the number of times the inventory is sold and replaced by new inventory in each period. The cost of goods sold is divided by the average inventory to calculate this ratio..

To determine:

The inventory turnover of the given company.

7)

Introduction:

Times interest earned indicates the ability of the company to meet its interest payment obligations. It is computed by dividing the Earnings before Interest and taxes by the Interest expenses.

To determine:

The times interest earned for the given company.

8)

Introduction:

The Profit margin ratio indicates the profitability of the company when compared with the total revenue. The net profits is divided by the sales revenue to calculate the profit margin.

To determine:

The profit margin ratio of the given company.

9)

Introduction:

Total Asset turnover indicates the efficiency of the company in utilizing its assets to generate sales. The net sales is divided by the average total assets to calculate the ratio.

To determine:

The total asset turnover ratio of the given company