Vertical Analysis: In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc. Requirement 1 To compute: Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity , and total assets for the current year and prior year.

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Answer 1

Question

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Information pertaining to Noskey Corporation’s sales revenue follows: November 20X1 (Actual) December 20X1 (Budgeted) January 20X2 (Budgeted)Cash sales $ 115,000 $ 121,000 $ 74,000Credit sales 282,000 409,000 208,000Total sales $ 397,000 $ 530,000 $ 282,000Management estimates 5% of credit sales to be uncollectible. Of collectible credit sales, 60% is collected in the month of sale and the remainder in the month following the month of sale. Purchases of inventory each month include 70% of the next month’s projected total sales (stated at cost) plus 30% of projected sales for the current month (stated at cost). All inventory purchases are on account; 25% is paid in the month of purchase, and the remainder is paid in…

Mirror Image Distribution Company expects its September sales to be 20% higher than its August sales of $163,000. Purchases were $113,000 in August and are expected to be $133,000 in September. All sales are on credit and are expected to be collected as follows: 40% in the month of the sale and 60% in the following month. Purchases are paid 20% in the month of purchase and 80% in the following month. The cash balance on September 1 is $23,000. The ending cash balance on September 30 is estimated to be:

Balance sheet information is useful for all of the following except:a) evaluating a company's financial flexibilityb) evaluating a company's liquidityc) assesing a company's riskd) determining free cash flows

Answer 2

Question

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 3

Question

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 4

Question

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

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Answer 5

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 6

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

Answer 7

Chapter 6, Problem 3.1AA

a.

To determine

Vertical Analysis:

In vertical analysis, every line item is represented as a percentage of a base amount which can be either total assets, total liabilities, total equities, etc.

Requirement 1

To compute:

Cash as a percentage of total current assets, total current liabilities, total stockholders’ equity, and total assets for the current year and prior year.

Answer 8

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

Answer 9

b.

To determine

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.

Answer 10

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

Answer 11

c.

To determine

Days’ sales uncollected:

This ratio defines how fast a company converts its receivable into known amounts of cash. The lesser the ratio is, the better it is for the company as it will prove that the company employs an efficient system of cash collection from customers.

Requirement 3

To compute:

The days’ sales uncollected for both the current and prior year.

Answer 12

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 13

d.

To determine

Changes in Days’ sales uncollected:

The changes in the ratio of days’ sales uncollected will greatly impact the liquidity problem of the entity. If it is reduced, the company is considered to be efficiently managing its cash collection mechanism or in case, it is increased, the otherwise will follow.

Requirement 4

Whether S’s receivables collection is showing a favorable or unfavorable change.

Answer 14

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Answer 15

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Answer 16

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Answer 17

Ch. 6 - Prob. 1QS Ch. 6 - Prob. 2QS Ch. 6 - Prob. 3QS Ch. 6 - Prob. 4QS Ch. 6 - Prob. 5QS Ch. 6 - Prob. 6QS Ch. 6 - Prob. 7QS Ch. 6 - Prob. 8QS Ch. 6 - Prob. 9QS Ch. 6 - Prob. 10QS

Horizontal Analysis: In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years. Requirement 2 To compute: Percentage change between the beginning and ending cash balances for the current year.

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Chapter 6 Solutions

Horizontal Analysis:

In horizontal analysis, a single line item is represented and compared as a percentage change from one base year to the subsequent years.

Requirement 2

To compute:

Percentage change between the beginning and ending cash balances for the current year.