
a.
Compute the
a.

Explanation of Solution
Current ratio: Current ratio is one of the
Determine the current ratio of Company F:
Working Note:
Determine the current assets.
Determine the current liabilities.
Thus, the current ratio of Company F is 5.13:1.
b.
Compute the earnings per share for Company F for 2014 from the data given in balance sheet.
b.

Explanation of Solution
Earnings per Share: Earnings per share help to measure the profitability of a company. Earnings per share are the amount of profit that is allocated to each share of outstanding stock.
Determine the earnings per shareof Company F:
Thus, the earnings per share of Company Fare$22.72 per share.
c.
Compute the quick (acid-test) ratio for Company F for 2014 from the data given in balance sheet.
c.

Explanation of Solution
Quick ratio: It is a ratio used to determine a company’s ability to pay back its current liabilities by liquid assets that are current assets except inventory and prepaid expenses. Quick ratio is calculated as follows:
Determine the quick ratioof Company F:
Determine the quick assets.
Thus, the quick ratio of Company F is 3.67:1.
d.
Compute the
d.

Explanation of Solution
Return on investments (assets): Return on investments (assets) is the financial ratio which determines the amount of net income earned by the business with the use of total assets owned by it. It indicates the magnitude of the company’s earnings with relative to its total assets. Return on investment is calculated as follows:
Determine the return on investment ratioof Company F:
Note: As there is no information given regardingAveragetotal assets, the Total asset is assumed as Averagetotal asset.
Thus, the return on investment of Company F is 10.00%.
e.
Compute the return on equity for Company F for 2014 from the data given in balance sheet.
e.

Explanation of Solution
Return on equity: It is one of the profitability ratios.Return on average equity ratio is used to determine the relationship between the net income available for the common stockholders’ and the average common stock. Return on average equity is calculated as follows:
Determine the return on equity ratioof Company F:
Working Note:
Determine the amount of average total
Note: As there is no information given regardingAveragetotal stockholders’ equity, the Total stockholders’ equity is assumed as Averagetotal stockholders’ equity.
Thus, the return on equity of Company F is 12.54%.
f.
Compute the debt to equity ratio for Company F for 2014 from the data given in balance sheet.
f.

Explanation of Solution
Debt–to-equity ratio: The debt-to-equity ratio indicates that the company’s debt as a proportion of its stockholders’ equity. The debt-to-equity ratio is calculated using the formula:
Determine the debt-to-equity ratioof Company F:
Working Note:
Determine the amount of total stockholders’ equity.
Determine the amount of total liabilities.
Thus, the debt-to-equity ratio of Company F is 25.39%.
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Chapter 9 Solutions
Survey Of Accounting
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