ACC 345 Module Two Summary Template (1)
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ACC 345 Module Two Summary Template
1.
Define the measurement of each type of ratio and the accounts included in the calculation. Refer to the Ratios tab.
Regarding the measurement of ratios in the spreadsheet they are separated into four different sections. These sections are labeled as liquidity, activity, coverage/leverage, and profitability ratios. Liquidity is made up of current, quick, and working capital ratios. Current ratios are calculated by dividing current assets by current liabilities. Quick ratios are calculated by taking cash and cash equivalent adding them to A/R and dividing that by total current liabilities. The working capital ratio is calculated by subtracting total current liabilities from total current assets. Activity Ratios:
Receivable Turns – total revenue divided by accounts receivable net.
Days in Receivable – days in a year divided by receivable turns.
Revenue/Working Capital – total revenue divided by the working capital.
Revenues/Fixed Assets – total revue divided by property, plant, and equipment.
Revenues/Total Assets – total revenue divided by total assets.
Inventory Turns – inventory divided by cost of sales.
Days in Inventory – days in a year divided by inventory turns.
Payables Turns – cost of sales divided by accounts payable.
Days in Payables – days in a year divided by payables turns.
Coverage/Leverage Ratios:
Fixed Assets /Equity – PP&E divided by total equity.
Profitability Ratios: Return on Equity – net income (loss) before tax divided by total equity.
Return on Total Assets – net income (loss) before tax divided by total assets.
Net Profit on Revenues – net income (loss) before tax divided by total revenue.
2.
Explain the significance of each ratio to the company.
Ratios in liquidity are important because they are used to assess/evaluate a company’s ability to settle any short-term loans. This also signifies if a business can handle its liquid and pay off their debts. Activity ratios are extremely important because they signify how well the company can utilize its assets to produce revenue. This is important for any audience and can help gauge the financial health of the company. Coverage/leverage ratios are used to determine how company obligations are used to finance its assets. Lastly, profitability ratios are used to evaluate the company’s ability to generate profit, and this is highlighted to its audience as the better this is the more edge they have over competition.
3.
Identify an asset or liability being measured at fair value. Provide the specific disclosure note(s). Include the citation(s).
One example of an asset being measured at fair value would be intangibles.
“Fair value is the price the Company would receive to sell an asset or pay to transfer a liability in an orderly transaction with a market participant at the measurement date. The Company's assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. Financial assets and liabilities are classified in their entirety based on the most conservative level of input that is significant to the fair value measurement (SEC).” 4.
Provide the classification for the GAAP rule that allows the fair value measurement.
The GAAP classification that allows for fair value measurement is ASC 820
References
Include any references used to complete this assignment. This section is for the full citation. Sources should be cited using APA style.
Inline XBRL Viewer. (n.d.). https://www.sec.gov/ix?doc=%2FArchives%2Fedgar%2Fdata
%2F0000320187%2F000032018722000038%2Fnke-
20220531.htm#i46e4e3c717064a3ca53a7fe9eaaaeca4_127 NKE-20210531. (n.d.). https://www.sec.gov/Archives/edgar/data/320187/000032018721000028/nke-
20210531.htm#ibe46f16d2db0431aa4fa39b5b30b6f15_127 FASB Accounting Standards Codification®. (n.d.). https://asc.fasb.org/Home
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Related Questions
FE3 - Show your work
(a) Define the current ratio and return on assets ratio.
(b) State what financial management problem each of these financial ratios could be used to identify.
(c) What would be a good benchmark to use for each of these financial ratios?
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In performing vertical analysis, we express each item in a financial statement as a percentage of a base amount. What base amount is commonly used for income statement accounts? For balance sheet accounts?
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where are the 4 financial statements?
income statementbalance sheetfinancial positioncash flow statement
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List the different types and formulas for the following ratios:2.1 Capital Structure (Leverage) Ratios 2.2 Profitability Ratios 2.3 Liquidity Ratios
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Expressing accounts receivable as a percentage of total assets is an example ofa. ratio analysis.b. vertical analysis.c. horizontal analysis.d. trend analysis.
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Dividing quick assets by current liabilities is the calculation for the
a.ratio of liabilities to stockholders' equity.
b.acid-test ratio.
c.current ratio.
d.return on investment.
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Required:
(a) You are required to calculate the following ratios:(i) Gross profit margin(ii) Operating profit margin(iii) Expenses to sales(iv) Return on Capital Employed(v) Asset turnover(vi) Non-current asset turnover(vii) Current Ratio(viii) Quick Ratio(ix) Inventory days(x) Receivables days(xi) Payable days(xii) Interest cover
(b) In light of your calculations comment on the performance of the company over thelast two years.
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Classifying Balance Sheet Accounts
Use the letters a to k from the balance sheet classifications provided below to indicate the usual classification for each of the 22 balance sheet items listed below. Also indicate whether an account is a contra account. If the item is not a contra account, select "N/A" as your answer..
Balance Sheet Classification
a. Current assets.
g. Long-term liabilities.
b. Investments.
h. Paid-in capital.
c. Property, plant, and equipment.
i. Retained earnings.
d. Intangible assets.
j. Accumulated other comprehensive income.
e. Other assets.
k. Noncontrolling interests.
f. Current liabilities.
Balance Sheet Item
Classification
Contra account
1. Accumulated depreciation.
Answer
Answer
2. Bonds payable (due in 10 years).
Answer
Answer
3. Accounts payable (trade).
Answer
Answer
4. Investment in stock of another company (long-term holding).
Answer
Answer
5. Land (in use).
Answer
Answer
6.…
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explain financial ratios and financial cycle
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Question: What is the formula for calculating the current ratio?
a. Current Assets / Current Liabilitiesb. Current Liabilities / Current Assetsc. Total Assets / Total Liabilitiesd. Total Liabilities / Total Assets
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Present formulas and examples of the following financial ratios (Financial ratios)a. gross marginb. profit margin on salesc. return on equity (ROE)
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Define these.
a. Return on equityb. Total assets turnoverc. Return on assetsd. Current ratioe. Receivables turnover
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Define each of the following terms:
a. Liquid asset
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c. Asset management ratios: inventory turnover ratio
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e. Profitability ratios: profit margin; return on total assets (ROA); return on common equity (ROE); return
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f. Market value ratios: price/earnings (P/E) ratio; market/book (M/B) ratio; enterprise value/EBITDA
ratio
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a. List the four types of financial statements
b.Describe the interrelationshipbetween balance sheet and the income statement
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Chapter 24 discusses various methods of analyzing financial statements in terms of calculating ratios. Specifically, Return on Assets (ROA) is a very simple calculation: ROA= Net Income/Average Total Assets. Another method at arriving at this ratio is the DuPont Equation that was discussed in your textbook. In looking at the DuPont Equation, what benefits are derived by using this method rather than the most typical method that I have described above?
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_______ ratios are used to measure the speed in which various assets are converted into sales or cash.
A
Debt (aka Leverage)
B
Efficiency (aka working capital)
C
Profitability
C
Coverage
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Computing liquidity, working captial and current ratio.
Computing measures of profitability, profit margin, asset turnover, return on assets, debt to equity ratio, and return on equity
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Which of the following is true about a common size balance sheet?
The assets, liabilities, and equities are reported at their market values.
The assets, liabilities, and equities are reported as percentages of common stock.
The assets, liabilities, and equities are reported as percentages of total assets.
O The assets, liabilities, and equities are arranged in the alphabetical order.
The assets, liabilities, and equities are reported as percentages of the assets, liabilities, and equities of a
competing firm.
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are used to measure the speed in which various
accounts are converted into sales or cash.
Select one:
a.
Debt ratios
O b. Activity ratios
C. Profitability ratios
O d. Liquidity ratios
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