Current ratio : The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company. Formula of current ratio: Current ratio = Current assets Current liabilities Earnings per share (EPS) : The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS). Use the following formula to compute EPS: EPS = Net income − Preferred dividends Weighted average common shares outstanding Debt to assets ratio : This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company. Formula of debt to assets ratio: Debt to assets ratio = Total liabilities Total assets Free cash flow : This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends. Formula of free cash flow: Free cash flow = { Net cash provided by operating activities − Capital expenditures − Dividends } To determine : (a) Current ratio of Company AE for 2013 and 2014

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Answer 1

Question

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

(b)

To determine

EPS of Company AE for 2013 and 2014

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

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Students have asked these similar questions

Summit Electronics manufactures a single product. The company has provided the following data for its most recent month of operations: Number of units produced: 3,800 Variable costs per unit: • Direct materials: $95 Direct labor: $100 • Variable manufacturing overhead: $4 . Variable selling and administrative expense: $10 Fixed costs: • Fixed manufacturing overhead: $152,000 Fixed selling and administrative expense: $290,000 There were no beginning or ending inventories. Compute the absorption costing unit product cost.

The net profit of a company for a year on a variable costing basis is $92,000. On an absorption costing basis, the net profit is $78,800. Fixed manufacturing overhead unit were the same in both the prior costs per and current year (i.e. $1.10 per unit). What was the change in inventory over the year?

Glorious Drinks Co. began the year with net fixed assets of $25,000 and had $27,200 in the account at the end of the year. During the year, the company paid $5,500 in interest and expensed $4,000 in depreciation. The company purchased $10,500 in fixed assets during the year. How many fixed assets did the company sell during the year?

Answer 2

Question

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

(b)

To determine

EPS of Company AE for 2013 and 2014

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Expert Solution & Answer

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See solution

Answer 3

Question

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

(b)

To determine

EPS of Company AE for 2013 and 2014

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

(b)

To determine

EPS of Company AE for 2013 and 2014

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Expert Solution & Answer

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Check out a sample textbook solution

See solution

Answer 5

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

(b)

To determine

EPS of Company AE for 2013 and 2014

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Answer 6

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

Answer 7

Chapter 2, Problem 2.11E

(a)

To determine

Current ratio: The financial ratio which evaluates the ability of a company to pay off the debt obligations which mature within one year or within completion of operating cycle is referred to as current ratio. This ratio assesses the liquidity of a company.

Formula of current ratio:

Current ratio=Current assetsCurrent liabilities

Earnings per share (EPS): The amount of net income available to each shareholder per common share outstanding is referred to as earnings per share (EPS).

Use the following formula to compute EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.

Formula of debt to assets ratio:

Debt to assets ratio=Total liabilitiesTotal assets

Free cash flow: This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends.

Formula of free cash flow:

Free cash flow= {Net cash provided by operating activities−Capital expenditures−Dividends}

To determine: (a) Current ratio of Company AE for 2013 and 2014

Answer 8

(b)

To determine

EPS of Company AE for 2013 and 2014

Answer 9

(b)

To determine

EPS of Company AE for 2013 and 2014

Answer 10

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

Answer 11

(c)

To determine

Deb to assets ratio of Company AE for 2013 and 2014.

Answer 12

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

Answer 13

(d)

To determine

free cash flow of Company AE for 2013 and 2014.

Answer 14

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

Answer 15

(e)

To determine

Comment on the changes in solvency from 2013 to 2014

Answer 16

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Answer 17

(f)

To determine

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

Answer 18

Expert Solution & Answer

Answer 19

Expert Solution & Answer

Answer 20

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Answer 21

Ch. 2 - What is meant by the term operating cycle?Ch. 2 - Define current assets. What basis is used for...Ch. 2 - Prob. 3Q Ch. 2 - Prob. 4Q Ch. 2 - Prob. 5Q Ch. 2 - Prob. 6Q Ch. 2 - Prob. 7Q Ch. 2 - Prob. 8Q Ch. 2 - What do these classes of ratios measure? (a)...Ch. 2 - Prob. 10Q

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EPS of Company AE for 2013 and 2014

Deb to assets ratio of Company AE for 2013 and 2014.

free cash flow of Company AE for 2013 and 2014.

Comment on the changes in solvency from 2013 to 2014

Analyze the ability of Company AE in meeting its investment requirements and explain how Company AE would overcome at times of deficiency

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