Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN: 9781285190907
Author: James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher: Cengage Learning
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Chapter 5, Problem 19PC
a.
To determine
Calculate the A’s Z-score for B B Co. Inc. and C C for 2007 and 2008.
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Lynch, Inc., is a hardware store operating in Boulder, Colorado. Management recently made some poor inventory acquisitions that have loaded the store with unsalable merchandise. Because of the drop in revenues, the company is now insolvent. The entire inventory can be sold for only $33,000. Following is a trial balance as of March 14, 2017, the day the company files for a Chapter 7 liquidation:Company officials believe that 60 percent of the accounts receivable can be collected if the company is liquidated. The building and land have a fair value of $75,000, and the equipment is worth $19,000. The investments represent shares of a nationally traded company that can be sold at the current time for $21,000. Administrative expenses necessary to carry out a liquidation would approximate $16,000.Prepare a statement of financial affairs for Lynch, Inc., as of March 14, 2017.
Barber Technologies designs and develops software to be used for the management of inventory by both retailers and manufacturing firms. Over the past three years, the company has experienced significant competition and a declining market resulting in a significant deficit in retained earnings. In response to this condition, you have suggested that management consider the following:
a. Recognize all asset impairments.b. Restructure the long-term debt by committing to make future payments that are less than
the basis of the original debt.c. Adjust the par value of common stock to eliminate the deficit in retained earnings.
Discuss how the above actions will likely affect:
1. The current ratio, debt-to-equity ratio, and return on equity.
2. The determination of net income in subsequent periods.
Franklin Co. has experienced gross profit ratios for 2019, 2018, and 2017 of 33%, 30%, and 31%, respectively. On
April 3, 2020, the firm's plant and all its inventory were destroyed by a tornado.
Accounting records for 2020, which were available because they were stored in a protected vault, showed the
following:
Sales from January 1 through April 2
January 1 inventory amount
Purchases of inventory from January 1 through April 2
$71,340
31,795
59,326
Required:
Calculate the amount of the insurance claim to be filed for the inventory destroyed in the tornado. (Hint: Use the
cost of goods sold model and a gross profit ratio that will result in the largest claim.) (Do not round intermediate
calculations.)
Insurance claim
Chapter 5 Solutions
Financial Reporting, Financial Statement Analysis and Valuation
Ch. 5 - Prob. 1QECh. 5 - Prob. 2QECh. 5 - A firm has experienced an increasing current ratio...Ch. 5 - A firm has experienced a decrease in its current...Ch. 5 - Prob. 5QECh. 5 - A firm had the following values for the four debt...Ch. 5 - Prob. 7QECh. 5 - Prob. 8QECh. 5 - Prob. 9QECh. 5 - Prob. 10QE
Ch. 5 - Market equity beta measures the covariability of a...Ch. 5 - Altmans bankruptcy risk model utilizes the values...Ch. 5 - Calculating and Interpreting Risk Ratios. Refer to...Ch. 5 - Refer to the financial state-ment data for...Ch. 5 - Refer to the profitability ratios of Coca-Cola in...Ch. 5 - Delta Air Lines, Inc., is one of the largest...Ch. 5 - Prob. 17PCCh. 5 - Prob. 18PCCh. 5 - Prob. 19PCCh. 5 - Prob. 20PCCh. 5 - Prob. 21PCCh. 5 - Prob. 22PCCh. 5 - Compute the values of each of the ratios in...
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