Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 2, Problem 2.4AP
1.
To determine
Concept Introduction:
To Calculate:
2.
To determine
Concept Introduction:Balance sheet is the statement which makes a record of all assets and liabilities on a particular date. Balance sheet shows value of assets and liabilities on closing date of year. Current ratio is calculated by dividing the current assets by the current liabilities. It is Helps Company to measure the liquidity.
To State: Whether company is liquid or not and other factors to determine liquidity.
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Instructions
Using the financial statements and additional information, compute the following ratios for the El
Camino Company for 2021. Show all computations.
Computations
1. Current ratio
2. Return on common stockholders' equity
3.
Price-earnings ratio
4.
Inventory turnover
5. Accounts receivable turnover
6.
Times interest earned
7.
Profit margin
8.
Days in inventory
9.
Payout ratio
10. Return on assets
Prepare a financial statement analysis in terms of liquidity, solvency, profitability and efficiency of the
following company.
Financial Ratios
Fiscal Year Ended
Previous Fiscal Year
Formula
Dec 31, 2019
Dec 31, 2018
Liquidity Analysis Ratios:
Current Assets / Current
Liabilities
Current Ratio or
1.46
1.36
Working Capital Ratio
(Current Assets - Inventory -
Prepayments) / Current
Liabilities
Quick Ratio
0.96
0.86
Solvency Ratio
Total Assets / Total Liabilities 1.46
1.44
Financial Leverage Ratios
Debt Ratio
Total Debt/Total Assets
0.47
0.48
Total Debt/Total Stockholders
Equity
Debt-to-Equity Ratio
1.48
1.57
Earnings Before Interest and
Taxes (EBIT) / Interest
Charges
Total Assets / Total
Stockholders' Equity
Interest Coverage
2.38
2.61
Asset to Equity Ratio
3.16
3.28
Profitability Ratios
Gross Profit Margin
Sales - Cost of Goods Sold or
Cost of Service / Sales
19.76
19.43
Net Profit Margin
Net Profit / Sales
11.34
11.42
Net Income / Total Assets
2.67
2.9
Return on Assets
Net Income /…
Current Position Analysis
The following data were taken from the balance sheet of Albertini Company at the end of two recent fiscal years:
Previous Year
Current assets:
Cash
Marketable securities
Accounts and notes receivable (net)
Inventories
Prepaid expenses.
Total current assets.
Current liabilities:
Accounts and notes payable
(short-term)
Accrued liabilities
Total current liabilities
1. Working capital
2. Current ratio:
Current Year
3. Quick ratio
b. The liquidity of Albertini has
$356,400
412,700
168,900
1,547,700
797,300
$3,283,000
$388,600
281,400
$670,000
$278,400
313,200
104,400
1,167,500
746,500
$2,610,000
a. Determine for each year (1) the working capital, (2) the current ratio, and (3) the quick ratio. Round ratios to one decimal place.
Current Year
Previous Year
$406,000
174,000
$580,000
from the preceding year to the current year. The working capital, current ratio, and quick ratio have all
in current assets relative to current liabilities.
Most of these changes are the…
Chapter 2 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 2 - Read each definition below and write the number of...Ch. 2 - Prob. 2.1ECh. 2 - The Operating Cycle Two Wheeler Cycle Shop buys...Ch. 2 - Classification of Financial Statement Items Regal...Ch. 2 - Current Ratio Baldwin Corp. reported the following...Ch. 2 - Classification of Assets and Liabilities Indicate...Ch. 2 - Selling Expenses and General and Administrative...Ch. 2 - Prob. 2.7ECh. 2 - Income Statement Ratio The income statement of...Ch. 2 - Statement of Retained Earnings Landon Corporation...
Ch. 2 - Components of the Statement of Cash Flows Identify...Ch. 2 - Prob. 2.11ECh. 2 - Prob. 2.12MCECh. 2 - Prob. 2.13MCECh. 2 - Prob. 2.14MCECh. 2 - Materiality Joseph Knapp, a newly hired accountant...Ch. 2 - Costs and Expenses The following costs are...Ch. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Multiple-Step Income Statement and Profit Margin...Ch. 2 - Statement of Cash Flows Colorado Corporation was...Ch. 2 - Basic Elements of Financial Reports Comparative...Ch. 2 - Prob. 2.10MCPCh. 2 - Prob. 2.11MCPCh. 2 - Prob. 2.12MCPCh. 2 - Prob. 2.1APCh. 2 - Prob. 2.2APCh. 2 - Prob. 2.3APCh. 2 - Prob. 2.4APCh. 2 - Working Capital and Current Ratio The balance...Ch. 2 - Single-Step Income Statement The following income...Ch. 2 - Prob. 2.7APCh. 2 - Prob. 2.8APCh. 2 - Prob. 2.9APCh. 2 - Comparability and Consistency in Income Statements...Ch. 2 - Prob. 2.12AMCPCh. 2 - Prob. 2.1DCCh. 2 - Prob. 2.2DCCh. 2 - Analysis of Cash Flow for a Small Business...Ch. 2 - Prob. 2.4DCCh. 2 - The Expenditure Approval Process Roberto is the...Ch. 2 - Prob. 2.6DC
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