Intermediate Accounting (2nd Edition)
2nd Edition
ISBN: 9780134730370
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 6, Problem 1FSC
Use Foot Locker. Inc.’s balance sheet and other information provided on the next page to answer the following questions
- a. Compute Foot Looker's
working capital in 2015 and 2014. - b. Compute Foot Looker’s
current ratio in 2015 and 2014. - c. Comment on what the working capital and current ratio indicate about Foot Locker in 2015 and 2014.
- d. Compute Foot Locker’s debt-to-equity ratio for 2015 and 2014 Comment on what the debt-to-equity ratio indicates about Foot Locker in 2015 and 2014.
- e. Use DuPont analysts to decompose Foot Locker’s return on equity into return on assets and financial leverage Foot Locker’s net income in 2015 was $541 million. Comment on the effect of financial leverage on return on equity.
Foot Locker, Inc. CONSOLIDATED |
||
2015 | 2014 | |
ASSETS | (in millions) | |
Current Assets | ||
Cash and cash equivalents | $1,021 | $ 967 |
Merchandise inventories | 1,285 | 1.250 |
Other current assets | 300 | 239 |
Total Current Assets | 2,606 | 2.456 |
Property and Equipment - net | 661 | 620 |
234 | 221 | |
166 | 157 | |
Other Intangible Assets - net | 45 | 49 |
Other Assets | 73 | 74 |
Total Assets | $3,775 | $3.577 |
LIABILITIES AND SHAREHOLDERS' EQUITY | ||
Current Liabilities | ||
Accounts payable | $ 279 | $ 301 |
Accrued and other liabilities | 420 | 393 |
Current portion of capital lease obligations | 1 | 2 |
Total Current Liabilities | 700 | 696 |
Long-Term Debt and Obligations under Capital Leases | 129 | 132 |
Other Liabilities | 393 | 253 |
Total Liabilities | 1,222 | 1,081 |
Total Shareholders' Equity | 2,553 | 2,496 |
Total Liabilities and Shareholders' Equity | $3,775 | $3,577 |
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REQUIRED
Use the information provided in below to answer the following questions for the financial year ended 31 December 2023.
Note:
Answers to the ratios must be expressed to two decimal places.
Comment on the management of debtors and creditors after calculating the relevant ratios.
Determine the percentage of the profit after tax that has been retained by the company.
Calculate the return on capital employed and comment on your answer.
Would prospective lenders be concerned about the relative proportion of borrowed capital and own capital? Motivate your answer by calculating the relevant ratio.
Calculate the ratio that measures the efficiency with which the non-current and current assets of company were managed.
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INFORMATION
The following information was obtained from the financial records of Fiona Limited:
Analyzing the ability to pay liabilities
Big Beautiful Photo Shop has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2018. To answer this question, you gather the following data:
Compute the following ratios for 2018 and 2017, and evaluate the company’s ability to Pay its current Liabilities and total liabilities:
a. Current ratio
b. Cash ratio
c. Acid-test ratio
d. Debt ratio
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I need assistance on the following regarding the attached balance sheet and income statement:
Required:
a) Calculate the following financial ratios for 2016 and 2017
13. Debt-to-equity ratio
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Chapter 6 Solutions
Intermediate Accounting (2nd Edition)
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