Adequate information: Ratio Value Formula Current Ratio 1.832716 Current Assets Current Liabilities Inventory Turnover 4.414239 Cost of Goods Sold Average Inventory A/R Turnover 8.333333 Net Sales Average Accounts Receivable Fixed Turnover 1.657982 Net Sales Average Fixed Assets LTD To Equity 0.843090 Long Term Debt Equity Times Interest Earned 1.833333 Earnings Before Interest And Tax Interest Net Profit Margin 0.016000 Net Profit Sales Return On Total Assets 0.018061 Net Income Total Assets Return On Equity 0.040307 Net Income Equity To compute: Figures marked with ‘ratio’ in the financial statements.

Question

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Answer 1

Question

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

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3 years ago, you invested $9,200. In 3 years, you expect to have $14,167. If you expect to earn the same annual return after 3 years from today as the annual return implied from the past and expected values given in the problem, then in how many years from today do you expect to have $28,798?

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Ends Feb 2 Discuss and explain in detail the "Purpose of Financial Analysis" as well as the two main way we use Financial Ratios to do this.

Answer 2

Question

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

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Answer 3

Question

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

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Answer 4

Question

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

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Answer 5

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

Answer 6

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

Answer 7

Chapter 3, Problem 2P

a.

Summary Introduction

Adequate information:

Ratio Value Formula
Current Ratio 1.832716 Current AssetsCurrent Liabilities
Inventory Turnover 4.414239 Cost of Goods SoldAverage Inventory
A/R Turnover 8.333333 Net SalesAverage Accounts Receivable
Fixed Turnover 1.657982 Net SalesAverage Fixed Assets
LTD To Equity 0.843090 Long Term DebtEquity
Times Interest Earned 1.833333 Earnings Before Interest And TaxInterest
Net Profit Margin 0.016000 Net ProfitSales
Return On Total Assets 0.018061 Net Income Total Assets
Return On Equity 0.040307 Net IncomeEquity

To compute: Figures marked with ‘ratio’ in the financial statements.

Answer 8

a.

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Figure Calculated	Ratio Used for Calculation	Remark
Cost of Goods Sold	Inventory Turnover Ratio	Inventory value is given
Net Income	Return on Total Assets	Value of total asset is given
Equity	Return on Equity	Net income used to calculate
Long Term Debt	LTD To Equity	Equity value used
Sales	Net Profit Margin	Net profit used to find sales
Interest Expense	Times Interest Earned	Earnings before interest and tax used to calculate
Accounts Receivable	A/R Turnover	Sales figure already calculated
Net Plant and Equipment	Fixed Turnover	Sales figure used to find Average fixed assets and half of depreciation deducted to get closing value.

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 1

Answer 9

a.

Expert Solution

Answer 10

a.

Expert Solution

Answer 11

Expert Solution

Answer 12

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

Answer 13

b)

Summary Introduction

To compute: Figures marked with ‘formula’ in the financial statements.

Answer 14

b)

Expert Solution

Explanation of Solution

Sequence of figures calculated and basis:

Formula to Be Calculated	Remark
Gross Profit	Sales − Cost Of Goods Sold
Earnings Before Interest and Tax	Gross Profit − Depreciation − Selling and Administration Expenses − Lease Expenses
Earnings Before Tax	Earnings Before Interest And Tax − Interest
Tax	Charged at 40 % of Earnings Before Tax
Total Current Assets	Cash + Accounts Receivable + Inventory
Accumulated Depreciation	Balancing Figure
Short Term Notes Payable	Balancing Figure
Total Liabilities and Owner’s Equity	Total Assets

EBK 3N3-EBK: FINANCIAL ANALYSIS WITH MI, Chapter 3, Problem 2P , additional homework tip 2

Answer 15

b)

Expert Solution

Answer 16

b)

Expert Solution

Answer 17

Expert Solution

Answer 18

Ch. 3 - Prob. 2P

Ratio	Value	Formula
Current Ratio	1.832716	Current AssetsCurrent Liabilities
Inventory Turnover	4.414239	Cost of Goods SoldAverage Inventory
A/R Turnover	8.333333	Net SalesAverage Accounts Receivable
Fixed Turnover	1.657982	Net SalesAverage Fixed Assets
LTD To Equity	0.843090	Long Term DebtEquity
Times Interest Earned	1.833333	Earnings Before Interest And TaxInterest
Net Profit Margin	0.016000	Net ProfitSales
Return On Total Assets	0.018061	Net Income Total Assets
Return On Equity	0.040307	Net IncomeEquity

Explanation of Solution

To compute: Figures marked with ‘formula’ in the financial statements.

Explanation of Solution

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Chapter 3 Solutions