Concept Introduction Acid-Test Ratio: Acid-Test Ratio is a financial liquidity ratio that measures the ability of an organization to meet its short-term obligations with its quick assets. The quick assets usually include cash, marketable securities and accounts receivables. It is measured as a ratio of quick assets to current liabilities. Inventory Turnover: Inventory Turnover is a financial efficiency ratio that indicates how effectively and efficiently an organization manages its inventory. It measures how many times an organization sells and replaces its inventory during a period. It is calculated by dividing cost of goods sold by average inventory during a period. Days’ Sales in receivables: Days’ Sales in receivables is a financial ratio that measures the average number of days that an organization takes to collect money on its accounts receivables. It is calculated by dividing net receivables by average net credit sales per day. Debt Ratio: Debt ratio is a financial ratio that shows the percentage of total assets that is financed by the total liabilities of a company. Earnings per Share: Earnings per Share (EPS) is a financial profitability ratio that measures the amount of net income available to common stockholders earned on one share. It is calculated by dividing net income available to common stockholders by the average (or weighted average) number of shares outstanding during a period. Price Earnings Ratio: Price Earnings Ratio is a financial ratio for valuing a company’s stock in the market that shows what the investors are willing to pay for $1 of the company’s earnings. It is measured as a ratio of market price per share of a company’s stock to the earnings per share for a particular period. Dividend Payout Ratio: Dividend Payout Ratio is a financial ratio that shows the percentage of a company’s earnings that is paid in the form of dividends. It is calculated by dividing dividend per share by earnings per share (EPS) for a particular period. 1. To Compute: The given ratios for Best Digital Corp. and Very Zone, Inc. for the current year.

Question

Want to see the full answer?

Answer 1

Question

Chapter 17, Problem P17.32APGA

To determine

Concept Introduction

Acid-Test Ratio: Acid-Test Ratio is a financial liquidity ratio that measures the ability of an organization to meet its short-term obligations with its quick assets. The quick assets usually include cash, marketable securities and accounts receivables. It is measured as a ratio of quick assets to current liabilities.

Inventory Turnover: Inventory Turnover is a financial efficiency ratio that indicates how effectively and efficiently an organization manages its inventory. It measures how many times an organization sells and replaces its inventory during a period. It is calculated by dividing cost of goods sold by average inventory during a period.

Days’ Sales in receivables: Days’ Sales in receivables is a financial ratio that measures the average number of days that an organization takes to collect money on its accounts receivables. It is calculated by dividing net receivables by average net credit sales per day.

Debt Ratio: Debt ratio is a financial ratio that shows the percentage of total assets that is financed by the total liabilities of a company.

Earnings per Share: Earnings per Share (EPS) is a financial profitability ratio that measures the amount of net income available to common stockholders earned on one share. It is calculated by dividing net income available to common stockholders by the average (or weighted average) number of shares outstanding during a period.

Price Earnings Ratio: Price Earnings Ratio is a financial ratio for valuing a company’s stock in the market that shows what the investors are willing to pay for $1 of the company’s earnings. It is measured as a ratio of market price per share of a company’s stock to the earnings per share for a particular period.

Dividend Payout Ratio: Dividend Payout Ratio is a financial ratio that shows the percentage of a company’s earnings that is paid in the form of dividends. It is calculated by dividing dividend per share by earnings per share (EPS) for a particular period.

1.

To Compute: The given ratios for Best Digital Corp. and Very Zone, Inc. for the current year.

To determine

2.

A company’s stock that better fits the investment strategy.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

River is a salaried exempt worker who earns $73,630 per year for a 35-hour workweek. During a biweekly pay period, River worked 105 hours. What is the gross pay?

The industrial enterprise "HUANG S.A." purchased a sorting and packaging machine from a foreign company on 1/4/2017 at a cost of €500,000. The useful life of the machine was estimated by the Management at ten (10) years, while the residual value was estimated at zero. For the transportation of the machine from abroad to the company's factory, the amount of €20,000 was paid on 15/4/2017. As the insurance coverage of the machine during transportation was the responsibility of the selling company, HUANG S.A. proceeded to insure the machine from 16/4/2017 to 15/4/2018, paying the amount of €1,200. The delivery took place on 15/4/2017. As adequate ventilation of the multifunction device is essential for its proper operation, the company fitted an air duct on the multifunction device. The cost of the air duct amounted to €2,000 and was paid on 20/4/2017. On 25/4/2017, an external electrician was paid €5,000 for the electrical connection of the device. The company also paid €5,000 to an…