Accounting: What the Numbers Mean
Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 3, Problem 3.23C

Case 3.23

LO 3. 4, 6, 2

Focus company-analysis of liquidity and profitability’ measures In Exercise 1-1, you were asked to obtain a recent annual report of a company that you were interested in reviewing throughout this term.

Required:

a. Please locate the five-year (or longer) selected financial data (usually in the management discussion and analysis section of the annual report), or use your focus company’s income statement and balance sheet data to calculate as many of the following ratios and results as possible:

1. Working capital

2. Current ratio

3. Margin

4. Turnover

5. ROI

6. ROE

b. Briefly describe your perception of your focus company’s liquidity and profitability’ based on your calculation and review of these ratios and results.

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Question 2Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows: a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio: i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days)
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