Current ratio : Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities. Acid-test ratio: Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets. Gross margin ratio: Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue. Return on total assets: Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets. Requirement 1: Current ratio.

Question

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Answer 1

Question

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

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Cobalt Innovations is considering a new project that costs $2,500 and has no salvage value after 5 years. The project involves a new product that will be sold for $155 per unit, with variable costs of $120 per unit. The company incurs fixed costs of $4,200 and has a required return of 13.8%. If the company expects to sell 180 units, what is the firm’s degree of operating leverage? Answer

Cobalt Innovations is considering a new project that costs $2,500 and has no salvage value after 5 years. The project involves a new product that will be sold for $155 per unit, with variable costs of $120 per unit. The company incurs fixed costs of $4,200 and has a required return of 13.8%. If the company expects to sell 180 units, what is the firm’s degree of operating leverage?

Answer 2

Question

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 3

Question

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Expert Solution & Answer

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Answer 5

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Answer 6

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

Answer 7

Chapter 17, Problem 4PSB

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 1:

Current ratio.

Answer 8

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

Answer 9

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 2:

Acid-test ratio.

Answer 10

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

Answer 11

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 3:

Days' sales uncollected.

Answer 12

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

Answer 13

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 4:

Inventory turnover.

Answer 14

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

Answer 15

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 5

Days' sales in inventory.

Answer 16

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

Answer 17

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 6

Debt-to-equity ratio.

Answer 18

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

Answer 19

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 7

Times interest earned.

Answer 20

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

Answer 21

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 8

Profit margin ratio.

Answer 22

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

Answer 23

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 9

Total assets turnover.

Answer 24

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

Answer 25

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 10

Return on total assets.

Answer 26

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Answer 27

To determine

Concept Introduction:

Current ratio:

Current ratio helps in measuring short-term liquidity of a firm. Current ratio is computed on the basis of current assets and current liabilities.

Acid-test ratio:

Acid-test ratio shows the relationship between quick assets and current liabilities. This ratio helps in measuring ability of the company to meet its short-term liabilities with liquid assets.

Gross margin ratio:

Gross margin ratio shows relationship between sales revenue and gross profit. This ratio helps in knowing that how much gross profit margin a business is generating from given amount of sales revenue.

Return on total assets:

Return on total assets is known as profitability measurement which is calculated on the basis of net income and average total assets. This ratio helps in knowing the rate of return on average total assets.

Requirement 11

Return on common stockholders' equity.

Answer 28

Expert Solution & Answer

Answer 29

Expert Solution & Answer

Answer 30

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 31

Ch. 17 - Prob. 1QS Ch. 17 - QS 17-2 Standard of comparison C2 Identify which...Ch. 17 - Prob. 3QS Ch. 17 - Trend percents P1 Use the following information to...Ch. 17 - QS17-5 Common-size analysis P2 Refer to the...Ch. 17 - QS 17-6 Computing current ratio and acid-test...Ch. 17 - QS 17-7 Computing accounts receivable turnover and...Ch. 17 - QS 17-8 Computing inventory turnover and days'...Ch. 17 - QS17-9 Computing total asset turnover P3 Dundee...Ch. 17 - Prob. 10QS

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Chapter 17 Solutions