![Intermediate Accounting: Reporting And Analysis](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
Use the following information for P4—17 and P4—18:
The Hershey Company is one of the world’s leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hershey’s consolidated balance sheets for 20X2 and 20X3 follow.
Ratios Analysis: Hershey Refer to the information for Hershey On the preceding page. Additional information for 20X3 is as follows (amounts in millions):
Required:
Next Level Compute the following ratios for 20X3. Provide a brief description of what each ratio reveals about Hershey.
- 1. return on common equity
- 2. debt-to-assets
- 3. debt-to-equity
- 4. current
- 5. quick (Hershey uses cash and equivalents, short terms securities, and receivables in their quick ratio calculation.)
- 6. inventory turnover days
- 7.
accounts receivable turnover days - 8. accounts payable turnover days
- 9. operating cycle (in days)
- 10. total asset turnover
Requirement 1:
![Check Mark](/static/check-mark.png)
Determine the return on common equity ratio of Company H for 20X3.
Explanation of Solution
Determine the return on common equity ratio of Company H for 20X3:
Step 1: Calculate the average total common stockholders’ equity.
Step 2: Calculate the return on common equity ratio of C&C Incorporation for 20X3.
Hence, the return on common equity ratio of Company H for 20X3 is 0.616.
Comment:
Return on common equity ratio indicates that Company H generated a 61.6% return for its common shareholders.
Requirement 2:
![Check Mark](/static/check-mark.png)
Determine the debt-to-assets ratio of Company H for 20X3.
Explanation of Solution
Determine the debt-to-assets ratio of Company H for 20X3:
Hence, the debt-to-assets ratio of Company H for 20X3 is 0.698.
Comment:
Debt-to-assets ratio indicates that Company H’s 69.8% of total assets are financed by its creditors.
Requirement 3:
![Check Mark](/static/check-mark.png)
Determine the debt-to-equity ratio of Company H for 20X3.
Explanation of Solution
Determine the debt-to-equity ratio of Company H for 20X3:
Hence, the debt-to- equity ratio of Company H for 20X3 is 2.32.
Comment:
Debt-to-assets ratio indicates that Company H has $2.32 in total liabilities for every of $1.00 in equity.
Requirement 4:
![Check Mark](/static/check-mark.png)
Determine the current ratio of Company H for 20X3.
Explanation of Solution
Determine the current ratio of Company H for 20X3:
Hence, the current ratio of Company H for 20X3 is 1.77.
Comment:
Current ratio indicates that Company H has $1.77 in current assets for every of $1.00 in current liabilities.
Requirement 5:
![Check Mark](/static/check-mark.png)
Determine the quick ratio of Company H for 20X3.
Explanation of Solution
Determine the quick ratio of Company H for 20X3:
Hence, the quick ratio of Company H for 20X3 is 1.13.
Comment:
Quick ratio indicates that Company H has $1.13 in quick assets (cash and receivables) for every of $1.00 in current liabilities.
Requirement 6:
![Check Mark](/static/check-mark.png)
Determine the inventory turnover in days of Company H for 20X3.
Explanation of Solution
Determine the inventory turnover in days of Company H for 20X3:
Step 1: Calculate the average inventory.
Step 2: Calculate the inventory turnover.
Step 3: Calculate the inventory turnover in days of C&C Incorporation for 20X3.
Hence, the inventory turnover days of Company H for 20X3 are 61 days.
Comment:
On an average Company H takes 61 days to convert inventory into sales in the operation cycle.
Requirement 7:
![Check Mark](/static/check-mark.png)
Determine the accounts receivable turnover in days of Company H for 20X3.
Explanation of Solution
Determine the accounts receivable turnover in days of Company H for 20X3:
Step 1: Calculate the average accounts receivable.
Step 2: Calculate the accounts receivable turnover.
Step 3: Calculate the accounts receivable turnover in days of C&C Incorporation for 20X3.
Hence, the accounts receivable turnover days of Company H for 20X3 are 24 days.
Comment:
On an average Company H takes 24 days to collect its receivables from its customers.
Requirement 8:
![Check Mark](/static/check-mark.png)
Determine the accounts payable turnover in days of Company H for 20X3.
Explanation of Solution
Determine the accounts payable turnover in days of Company H for 20X3.
Step 1: Determine the amount of inventory purchases.
Step 2: Calculate the average accounts payable.
Step 3: Calculate the accounts payable turnover.
Step 4: Determine the accounts payable turnover in days.
Hence, the accounts payable turnover in days of Company H for 20X3 is 42 days.
Comment:
On an average Company H takes 42 days to pay its payables to its suppliers.
Requirement 9:
![Check Mark](/static/check-mark.png)
Determine the operating cycle in days of Company H for 20X3.
Explanation of Solution
Determine the operating cycle in days of Company H for 20X3:
Hence, the operating cycle in days of Company H for 20X3 is 43 days.
Comment:
Company H takes 43days to complete an operating cycle (the purchase of inventory and collection of cash from accounts receivable).
Requirement 10:
![Check Mark](/static/check-mark.png)
Determine the total assets turnover ratio of Company H for 20X3.
Explanation of Solution
Determine the total assets turnover ratio of Company H for 20X3:
Step 1: Calculate average total assets.
Step 2: Calculate the total assets turnover ratio of C&C Incorporation for 20X3.
Hence, the total assets turnover ratio of Company H for 20X3 is 1.41.
Comment:
Total assets turnover ratio indicates that Company H has generated $1.41 in sales for every of $1.00 in assets
Want to see more full solutions like this?
Chapter 4 Solutions
Intermediate Accounting: Reporting And Analysis
- For this question, calculate all values to 2 decimal places of £M (e.g. £123.45M) unless otherwise specified, and all ratios to 2 decimal places of percentage (e.g. 9.87%). You are given the following income statements and balance sheets for Freddie M Corporation for fiscal years 2045 and 2046 (all figures are in £ million), Income Statement Balance Sheet Sales Cost of goods sold Gross margin Wage & salaries expense Depreciation expense Earnings before interest and tax Interest expenses Taxes Net income Dividends Change in shareholder's equity Assets: Cash & equivalents Receivables Inventories Current Assets Property, plant & equipment Accumulated depreciation Net property, plant & equip Total Assets 2045 400.00 -200.00 200.00 -50.00 -25.00 125.00 -25.00 -60.00 40.00 -16.00 24.00 2045 2046 480.00 -240.00 240.00 -60.00 -25.00 155.00 -20.00 -70.00 65.00 -26.00 39.00 2046 Liabilities: 30.00 36.00 Payables 60.00 Short-term debt 50.00 50.00 60.00 Long-term debt 130.00 156.00 Total…arrow_forwardCompare Income Statements and Balance Sheets of Competitorsa. Following are selected income statement data from two European grocery chain companies: Tesco PLC (UK) and Ahold (the Netherlands). Prepare a common‑size income statement. To do this, express each income statement amount as a percent of sales.Note: Round percentage to one decimal point (for example, round 18.566% to 18.6%). Income Statements Tesco Carrefour Group For Fiscal Year Ended February 24, 2019 December 31, 2018 (£ millions) (€ millions) Sales £57,520 Answer €70,125 Answer Cost of goods sold 53,790 Answer 54,765 Answer Gross profit 3,730 Answer 15,360 Answer Total expenses 2,542 Answer 15,670 Answer Net income £1,188 Answer €(310) Answer b. Following are selected balance sheet data from two European grocery chain companies: Tesco PLC (UK) and Ahold (the Netherlands). Prepare a common‑size balance sheet. To do this, express each…arrow_forwardRatios Analysis: Hershey The Hershey Company is one of the world's leading producers of chocolates, candies, and confections. It sells chocolates and candies, mints and gums, baking ingredients, toppings, and beverages. Hershey's consolidated balance sheets for 20X2 and 20X3 follow. Hershey: Consolidated Balance Sheets Dollar Amounts in Millions 20X2 20X3 Assets Current Assets Cash and Equivalents $728.3 $1,118.5 Receivables 461.4 477.9 Inventories 633.3 659.5 Deferred Income Taxes 122.2 52.5 Prepaid Expenses and Other Assets 168.3 178.9 Total Current Assets $2,113.5 $2,487.3 Property, Plant and Equipment, Net 1,674.1 1,805.3 Goodwill 588.0 576.6 Other Intangible Assets, net 214.7 195.2 Other Assets 164.5 293.0 Total Assets $4,754.8 $5,357.5 Liabilities and Shareholders' Equity Current Liabilities Accounts Payable $442.0 $461.5 Accrued Liabilities 650.9 699.7 Accrued Income Taxes 2.3 79.9…arrow_forward
- 10. Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B. Compute the number of days' sales in receivables ratios for each company for 2018 and 2019. C. Determine which company is the better investment and why. Round answers to two decimal places. BEAN SUPERSTORE LEGUMES PLUS Comparative Balance Sheet December 31, 2017, 2018, and 2019 Comparative Balance Sheet December 31, 2017, 2018, and 2019 2019 2018 2017 2019 2018 2017 Assets Cash $345,600 67,000 145,830 100,465 $330,460 62,000 178,011 101,202 $300,000 59,000 155,205 103,085 $407,000 85,430 128,080 182,006 $386,450 82,670 40,036 23,400 $356,367 79,230 52,142 111,701 Accounts Receivable Inventory Equipment Total Assets $658,895 $671,673 $617,290 $802,516 $532,556 $599,440 Liabilities Salaries Payable Accounts Payable Notes Payable $ 91,455 $ 90,200 70,000 41,000 $ 88,563…arrow_forwardCarson Electronics’ management has long viewed BGT Electronics as an industry leader and uses this firm as a model firm for analyzing its own performance. The balance sheet and income statements for the two firms are as follows: Calculate the following ratios for both Carson and BGT: a) Current ratio: b) Times interest earned: c) Inventory turnover:arrow_forwardAnalyze and compare Clorox and Procter & Gamble The Clorox Company (CLX) and The Procter & Gamble Company (PG) produce and sell packaged consumer products around the world. Income and interest expense information from financial statements for a recent year follows (in millions): Clorox Procter & Gamble Interest expense $88 $579 Income before income tax expense 983 13,369 a. Compute the times interest earned for each company. Round to one decimal place. Clorox: fill in the blank 1 Procter & Gamble: fill in the blank 2 b. If you were a lender to these two companies, which one appears to have the greater coverage of interest expense and thus the greater protection for your loan interest?arrow_forward
- 10. Review the select information for Bean Superstore and Legumes Plus (industry competitors), and then complete the following. A. Compute the accounts receivable turnover ratios for each company for 2018 and 2019. B Compute the number of days sales in receivables ratios for each company for 2018 and 2019 C. Determine which company is the better investment and why. Round answers to two decimal places.arrow_forwardPlease help me sir with thisarrow_forwardComparing Income Statements and Balance Sheets of CompetitorsFollowing are selected income statement and balance sheet data from two retailers: Abercrombie & Fitch (clothing retailer in the high-end market) and TJX Companies (clothing retailer in the value-priced market). (a) Express each income statement amount as a percentage of sales. Round your answers to one decimal place (ex: 0.2345 = 23.5%). Income Statement ($ millions) ANF TJX Sales $4,680 $21,058 Cost of goods sold 1,599 Answer 16,021 Answer Gross profit 3,081 Answer 5,037 Answer Total expenses 2,435 Answer 4,003 Answer Net income $ 646 Answer $ 1,034 Answer (b) Express each balance sheet amount as a percentage of total assets. Round your answers to one decimal place (ex: 0.2345 = 23.5%). Balance Sheet ($ millions) ANF TJX Current assets $1,010 Answer $3,929 Answer Long-term assets 1,627 Answer 2,608 Answer Total assets…arrow_forward
- Please help. Thanksarrow_forwardRatios Analyses: McCormick McCormick & Company, Inc. is one of the world's leading producers of spices, herbs, seasonings, condiments, and other flavorings for foods. Its products are sold to consumers, with some of the leading brands of spices and seasonings, as well as to industrial producers of foods. McCormick's consolidated balance sheets for 20X2 and 20X3 follow. McCormick: Consolidated Balance Sheets Dollar Amounts in Millions 20X2 20X3 Assets Current Assets Cash and Equivalents $79.0 $63.0 Receivables 465.9 495.5 Inventories 615.0 676.9 Prepaid Expenses and Other Assets 125.5 134.8 Total Current Assets $1,285.4 $1,370.2 Property and Equipment, Net 547.3 576.6 Goodwill 1,695.3 1,798.5 Intangible Assets, net 323.5 333.4 Investments and Other Assets 313.9 371.0 Total Assets $4,165.4 $4,449.7 Liabilities and Shareholders' Equity Current Liabilities Short-Term Borrowings $140.3 $211.6 Current…arrow_forwardPlease do not Give image format And Complete all requiredarrow_forward
- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubManagerial Accounting: The Cornerstone of Busines...AccountingISBN:9781337115773Author:Maryanne M. Mowen, Don R. Hansen, Dan L. HeitgerPublisher:Cengage Learning
- Financial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337788281/9781337788281_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337912020/9781337912020_smallCoverImage.jpg)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337115773/9781337115773_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337272124/9781337272124_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337909730/9781337909730_smallCoverImage.gif)
![Text book image](https://www.bartleby.com/isbn_cover_images/9781337395083/9781337395083_smallCoverImage.gif)