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. 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 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 } 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). Formula of EPS: EPS = Net income − Preferred dividends Weighted average common shares outstanding To compute : Working capital

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Answer 1

Question

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

(b)

To determine

To compute: Current ratio

(c)

To determine

To compute: Debt to assets ratio

(d)

To determine

To compute: Free cash flow

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

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Sanchez Manufacturing produces lawn mowers that sell for $175. Each lawn mower uses $32 in direct materials and $18 in direct labor per unit. Sanchez has two activities: Assembly, which is applied at the rate of $8 per assembly hour, and Testing, which is applied at the rate of $34 per batch. This month, Sanchez made 245 lawn mowers, using 980 assembly hours in 49 batches. What is the total manufacturing cost for one lawn mower?

Please provide the accurate answer to this general accounting problem using valid techniques.

The per-unit manufacturing cost under absorption costing is _________.

Answer 2

Question

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

(b)

To determine

To compute: Current ratio

(c)

To determine

To compute: Debt to assets ratio

(d)

To determine

To compute: Free cash flow

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

Expert Solution & Answer

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Answer 3

Question

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

(b)

To determine

To compute: Current ratio

(c)

To determine

To compute: Debt to assets ratio

(d)

To determine

To compute: Free cash flow

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

Expert Solution & Answer

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Answer 4

Question

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

(b)

To determine

To compute: Current ratio

(c)

To determine

To compute: Debt to assets ratio

(d)

To determine

To compute: Free cash flow

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

Expert Solution & Answer

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See solution

Answer 5

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

(b)

To determine

To compute: Current ratio

(c)

To determine

To compute: Debt to assets ratio

(d)

To determine

To compute: Free cash flow

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

Answer 6

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

Answer 7

Chapter 2, Problem 2.7AP

(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.

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

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}

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).

Formula of EPS:

EPS=Net income−Preferred dividendsWeighted average common shares outstanding

To compute: Working capital

Answer 8

(b)

To determine

To compute: Current ratio

Answer 9

(b)

To determine

To compute: Current ratio

Answer 10

(c)

To determine

To compute: Debt to assets ratio

Answer 11

(c)

To determine

To compute: Debt to assets ratio

Answer 12

(d)

To determine

To compute: Free cash flow

Answer 13

(d)

To determine

To compute: Free cash flow

Answer 14

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

Answer 15

(e)

To determine

To compute: EPS of Corporation T and Corporation W for 2014

Answer 16

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

Answer 17

(f)

To determine

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

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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To compute: Current ratio

To compute: Debt to assets ratio

To compute: Free cash flow

To compute: EPS of Corporation T and Corporation W for 2014

To compute: Analyze the liquidity and solvency position of two companies based on the computed ratios

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Chapter 2 Solutions