Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

Question

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Answer 1

Question

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

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A company sells a product for $25 per unit. The variable cost per unit is $15, and the total fixed costs are $50,000. a) How many units must the company sell to break even? b) If the company wants a profit of $10,000, how many units must it sell?

Answer 2

Question

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

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Answer 3

Question

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

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Answer 4

Question

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

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Answer 5

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

Answer 6

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

Answer 7

Chapter 18, Problem 1Q

(a)

To determine

Explain whether Mr. J correctly analyzes the financial statements based on liquidity and profitability.

Answer 8

(a)

Expert Solution

Explanation of Solution

Analysis of financial statements of the firm helps to frame policies and plans. Financial analysis determines the financial situation of the firm. It can be used for comparison.

No, Mr. J is not correctly analyzes the financial statements based on liquidity and profitability because the financial statements must be analyzed based on liquidity, profitability and solvency.

Liquidity refers to the ability to pay short term liabilities.
Profitability refers to the earning capacity of the firm.
Solvency determines the ability to pay long term liabilities of the firm.

Answer 9

(a)

Expert Solution

Answer 10

(a)

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

So, Mr. J was incorrect in analysis of the financial statements based on liquidity and profitability only.

Answer 13

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.

Conclusion

No, the short-term creditors, the long-term creditors and the stockholders do not have same primary interest in characteristics of the company.

Answer 14

(b)

To determine

Explain interest of short-term creditors, long-term creditors and stockholders in the company.

Answer 15

(b)

Expert Solution

Explanation of Solution

Short-term creditors: Short-term creditors are interested in liquidity ratio as they want to know whether their funds are safe or not.
Long-term creditors: Long-term creditors are interested in solvency ratio as they want to know whether their funds are safe or not in long run.
Stockholders: Stockholders are interested in all the three characteristics that is liquidity, profitability and solvency to know the overall performance of the company.
Short-term creditors are the current liability of the company and must be paid within a short period of time. So, they are interested in the company’s short run performance of company.
Long-term creditors are the non-current liability of the company and paid after a long period of time. So, they are interested in the company’s long run performance of company.
Stockholders have significant influence over the company’s activities and operations therefore they are interested in overall performance of company.