MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
15th Edition
ISBN: 9780134479903
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Question
Chapter 3, Problem 3.15P
a)
Summary Introduction
To discuss:
The current ratio, quick ratio, inventories turnover, average collection period and the total assets turnover for each company.
Introduction:
Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.
Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.
Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.
Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.
Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.
b)
Summary Introduction
To determine:
Liquidity position.
Introduction:
Current ratio: Current ratio which is calculated by dividing current assets from current liabilities shows the ability of the corporation to pay of its current liabilities.
Quick ratio: Quick ratio is used to determine the company’s capability to satisfy dues using only liquid assets. Inventory is excluded from this ratio to show liquidity in better manner and it is also known as acid-test ratio.
c)
Summary Introduction
To determine:
Analyzing average collection period of receivables.
Introduction:
Average collection period: Average collection period evaluates the number of days required by the firm to collect its credit.
d)
Summary Introduction
To determine:
Analyzing inventory turnover and total assets turnover.
Introduction:
Inventory turnover: Inventory turnover which reflects the number of times average inventory is converted into sales during a period is an asset management ratio that tells the manager how effectively they are managing the firm.
Total Assets Turnover Ratio: Total assets turnover ratio examines how effectively the asset of a firm is utilized.
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5. Profitability ratios
Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the
operating performance of a firm.
Your boss has asked you to calculate the profitability ratios of Diusitech Inc. and make comments on its second-year performance as compared with its
first-year performance.
The following shows Diusitech Inc.'s income statement for the last two years. The company had assets of $4,700 million in the first year and $7,518
million in the second year. Common equity was equal to $2,500 million in the first year, and the company distributed 100% of its earnings out as
dividends during the first and the second years. In addition, the firm did not issue new stock during either year.
Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars)
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2,540
2,000
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Operating costs except depreciation and…
Compare the two companies in the areas of liquidity, working capital management, profitability, financial leverage, and efficiency. What can you learn about these two companies?
Ratio
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Quick Ratio
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Return on Assets
7.61
6.26
Return on Equity
33.55
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Return on Sales
4.9
8.5
Debt/Equity Ratio
158.17
73.12
Interest Coverage
11.04
10.07
Revenue per Employee
258,824
308,631
Chapter 3 Solutions
MyLab Finance with Pearson eText -- Access Card -- for Principles of Managerial Finance
Ch. 3.1 - Prob. 3.1RQCh. 3.1 - Describe the purpose of each of the four major...Ch. 3.1 - Prob. 3.3RQCh. 3.1 - Prob. 3.4RQCh. 3.2 - With regard to financial ratio analysis, how do...Ch. 3.2 - What is the difference between cross-sectional and...Ch. 3.2 - Prob. 3.7RQCh. 3.2 - Prob. 3.8RQCh. 3.3 - Under what circumstances would the current ratio...Ch. 3.3 - In Table 3.5, most of the specific firms listed...
Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - What do the price/earnings (P/E) ratio and the...Ch. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - For the quarter ended January 28, 2017, Kroger...Ch. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Learning Goal 3 E3-4 Bluestone Metals Inc. is a...Ch. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Learning Goal 1 P3-2 1ncome statement preparation...Ch. 3 - Prob. 3.3PCh. 3 - Learning Goal 1 P3-4 Calculation of EPS and...Ch. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Learning Goals 1 P3-7 Initial sale price of common...Ch. 3 - Prob. 3.8PCh. 3 - Learning Goal 1 P3-9 Changes In stockholders...Ch. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Learning Goal 3 P3-11 Liquidity management Bauman...Ch. 3 - Prob. 3.12PCh. 3 - Inventory management Three companies that compete...Ch. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.15PCh. 3 - Learning Goal 4 P3-16 Debt analysis Springfield...Ch. 3 - Prob. 3.17PCh. 3 - Learning Goals 2, 3, 4 P3-18 Using Tables 3.1,...Ch. 3 - Learning Goals 5 P3-19 Common-size statement...Ch. 3 - The relationship between financial leverage and...Ch. 3 - Learning Goal 4 P3-21 Analysis of debt ratios...Ch. 3 - Learning Goal 6 P3-22 Ratio proficiency McDougal...Ch. 3 - Learning Goal 6 P3-23 Cross-sectional ratio...Ch. 3 - Learning Goal 6 P3-24 Financial statement analysis...Ch. 3 - Learning Goals 6 P3- 25 Integrative: Complete...Ch. 3 - Learning Goal 6 P3-26 DuPont system of analysis...Ch. 3 - Learning Goal 6 P3-27 Complete ratio analysis,...Ch. 3 - Spreadsheet Exercise The income statement and...
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