Working capital : The measure which evaluates the ability of a company to pay off the short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital. This ratio assesses the liquidity of a company. Formula of working capital: Working capital = Current assets − Current liabilities 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 Free cash flow : This measure evaluates the cash-generating capacity of a company from its operating activities, after paying capital expenditures and dividends. This ratio assesses the solvency of a company. Formula of free cash flow: Free cash flow = { Net cash provided by operating activities − Capital expenditures − Dividends } 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 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). This ratio assesses the profitability of a company. Formula of EPS: EPS = Net income − Preferred dividends Weighted average common shares outstanding To compute : (a) (i) Working capital, (ii) current ratio (iii) free cash flow (iv) debt to assets ratio (v) earnings per share for Company O for the year 2014

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 2, Problem 2.5AP

(a)

To determine

Working capital: The measure which evaluates the ability of a company to pay off the short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital. This ratio assesses the liquidity of a company.

Formula of working capital:

Working capital=Current assets−Current liabilities

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

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

Formula of free cash flow:

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

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

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). This ratio assesses the profitability of a company.

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: (a) (i) Working capital, (ii) current ratio (iii) free cash flow (iv) debt to assets ratio (v) earnings per share for Company O for the year 2014

(b)

To determine

To compute: compare the changes in liquidity, solvency, and profitability of 2014with the values of 2013

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Answer 2

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 2, Problem 2.5AP

(a)

To determine

Working capital: The measure which evaluates the ability of a company to pay off the short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital. This ratio assesses the liquidity of a company.

Formula of working capital:

Working capital=Current assets−Current liabilities

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

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

Formula of free cash flow:

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

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

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). This ratio assesses the profitability of a company.

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: (a) (i) Working capital, (ii) current ratio (iii) free cash flow (iv) debt to assets ratio (v) earnings per share for Company O for the year 2014

(b)

To determine

To compute: compare the changes in liquidity, solvency, and profitability of 2014with the values of 2013

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 2, Problem 2.5AP

(a)

To determine

Working capital: The measure which evaluates the ability of a company to pay off the short-term debt obligations, by computing the excess of current assets over current liabilities is referred to as working capital. This ratio assesses the liquidity of a company.

Formula of working capital:

Working capital=Current assets−Current liabilities

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

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

Formula of free cash flow:

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

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

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). This ratio assesses the profitability of a company.

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: (a) (i) Working capital, (ii) current ratio (iii) free cash flow (iv) debt to assets ratio (v) earnings per share for Company O for the year 2014

(b)

To determine

To compute: compare the changes in liquidity, solvency, and profitability of 2014with the values of 2013

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 2, Problem 2.5AP

(a)

To determine