EBK FINANCIAL ANALYSIS WITH MICROSOFT E
8th Edition
ISBN: 9781337515528
Author: Mayes
Publisher: CENGAGE LEARNING - CONSIGNMENT
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Question
Chapter 3, Problem 2P
a.
Summary Introduction
Adequate information:
| Ratio | Value | Formula |
| Current Ratio | 1.832716 | |
| Inventory Turnover | 4.414239 | |
| A/R Turnover | 8.333333 | |
| Fixed Turnover | 1.657982 | |
| LTD To Equity | 0.843090 | |
| Times Interest Earned | 1.833333 | |
| Net Profit Margin | 0.016000 | |
| Return On Total Assets | 0.018061 | |
| Return On Equity | 0.040307 |
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 | Value of total asset is given | |
| 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 |
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 |
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Chapter 3 Solutions
EBK FINANCIAL ANALYSIS WITH MICROSOFT E
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