Foundations of Finance (9th Edition) (Pearson Series in Finance)
9th Edition
ISBN: 9780134083285
Author: Arthur J. Keown, John D. Martin, J. William Petty
Publisher: PEARSON
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Textbook Question
Chapter 4, Problem 6SP
(Ratio analysis) The
Balance Sheet ($000)
Income Statement ($000)
Calculate the following ratios:
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Use the selected balance sheet and income statement information below for Anka Inc. to compute the current ratio. Explain what information this ratio provides.
Current Assets $26,300,450
Current Liabilities $14,879,200
Pretax Income $4,300,600
Interest Expense $1,300,000
b. Comment on each of the ratios calculated in part (a).
ABOVE IS THE QUESTION THAT I NEED ANSWER, BELOW IS THE QUESTION (A) ANSWER THAT MENTIONED IN QUESTION (B)
a) Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio:
ANSWER
i) Gross Profit Margin
Formula:
Gross profit Margin = ( Gross profit / Net sales ) x 100
Company A :
= ( 40000 / 160000 ) x 100
= 25 %
Company B :
= ( 60000 / 240000 ) x 100
= 25 %
ii)Net Profit Margin
Net profit Margin = ( Net profit / Net sales ) x 100
Company A :
= ( 9000 / 160000 ) x 100
= 5.625 %
Company B:
= ( 18000 / 240000 ) x 100
= 7.5 %
iii) Inventory Turnover Period (days)
Inventory Turnover Period (days) = ( Inventory / Cost of sales ) x 365
Company A:
= ( 30000 / 120000 ) x 100
= 25 %
Company B:
= ( 50000 / 180000 ) x 100
= 27.777 %
iv) Receivables Collection Period (days)
Receivables Collection Period (days) = ( Receivables / Net sales ) x 365…
Below are three ratios introduced in your text. Describe the purpose for each of them, and also state the formula for calculating them:
a. Revenue Per Employee Ratio:
b. Quick Ratio:
c. Fixed Assets Ratio:
Chapter 4 Solutions
Foundations of Finance (9th Edition) (Pearson Series in Finance)
Ch. 4 - Describe the five-question approach to using...Ch. 4 - What are the limitations of industry average...Ch. 4 - What is the difference between a firms gross...Ch. 4 - Prob. 9RQCh. 4 - Prob. 11RQCh. 4 - Prob. 1SPCh. 4 - (Evaluating profitability) The Malia Corporation...Ch. 4 - (Evaluating profitability) Last year, Stevens,...Ch. 4 - (Price/ book) Chang, Inc.s balance sheet shows a...Ch. 4 - Prob. 5SP
Ch. 4 - (Ratio analysis) The balance sheet and income...Ch. 4 - (Analyzing operating return on assets) The D.A....Ch. 4 - (Evaluating liquidity) The Tabor Sales Company had...Ch. 4 - (Evaluating current and proforma profitability)...Ch. 4 - (Financial analysis) The T. P. Jarmon Company...Ch. 4 - (Economic Value Added) K. Johnson, Inc.’s managers...Ch. 4 - Prob. 16SPCh. 4 - Prob. 17SPCh. 4 - Prob. 18SPCh. 4 - Prob. 1MCCh. 4 - Prob. 2MCCh. 4 - Prob. 3MCCh. 4 - Prob. 4MC
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- Selected financial data for Fey Company is presented below.arrow_forwardUsing the information provided below from Ben Company prepare two income statements: A normal GAAP Income Statement A CVP Income Statement These Income Statements should be done in good form and in Excel. Include formulas.arrow_forwarda)Please calculate all the ratios of companies - Profitability ratios(Profit margin, Return on assets , Return on equity) , Asset utilization ratios (Receivables turnover, Average collection period, Inventory turnover, Fixed asset turnover, Total asset turnover) Liquidity ratios (Current ratio, Quick ratio) & Debt utilization ratios (Debt total assets, Times interest earned, Fixed charge coverage) b) Calculate all your ratios in and Excel File. You need to show all your calculations in excel file but use the calculated value in your main report. c) Discuss each of the ratios for two years and explain their implications for the company. Analyze the ratios that you have calculated d) Use graphs, charts in your analysis.arrow_forward
- - Please refer to the following Income Statement and Balance Sheet (see attached picture): Prepare a vertical analysis for both the income statement and balance sheet. Write a paragraph comparing the company’s performance with the industry average. Compute the following ratios and comment on what the results mean when evaluating the company: Current ratio Gross profit percentage ratio Debt ratio Profit margin ratioarrow_forwardThe financial statements of Dandy Distributors Ltd. are shown on the "Fcl. Stmts." page. 1 Based on Dandy's financial statements, calculate ratios for the year ended December 31, 2020. Assume all sales are on credit. Show your work. 2 From these ratios, analyze the financial performance of Dandy.arrow_forwardAn insurance company has a combined ratio of 1.63, overall operating ratio of 1.04 and an expense ratio of 0.46, based on this information what is the company's investment income ratioarrow_forward
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