a. Return on equity b. Total assets turnover c. Return on assets d. Current ratio e. Receivables turnover

Survey of Accounting (Accounting I)
8th Edition
ISBN:9781305961883
Author:Carl Warren
Publisher:Carl Warren
Chapter9: Metric-analysis Of Financial Statements
Section: Chapter Questions
Problem 9.17E: Profitability metrics The following selected data were taken from the financial statements of The...
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a. Return on equity
b. Total assets turnover
c. Return on assets
d. Current ratio
e. Receivables turnover

Q5. Analysis of Financial Statements
There was a bit of concem about one of Big Rock's newer entities - Big Rock Paving
Company. Management wants you to review the two financial statements below and give
your analysis of the company's performance.
Big Rock Paving Company
Assets
Liabilities
Current Assets:
Current Liabilities:
Cash
500,000 Accounts Payable
300,000 Notes Payable
700,000
Accounts Receivable
500,000
Inventory
800,000
Total Current Assets
1,300,000 Total Current Liabilities
1,200,000
Owners' Equity
2,200,000 Common Stock ($1 Par)
600,000 Capital Surplus
1,600,000 Retained Earnings
2,900,000 Total Owners' Equity
Fixed Assets:
Property, Plant & Equipment
Less: Accumulated Depreciation
600,000
100,000
Net Fixed Assets
100,000
Total Assets
800,000
Total Liabilities and Owners
Equity
2,900,000
Big Rock Paving Company
Income Statement for Year Ending December 31, 2021
Sales
3,400,000
Less: Cost of Goods Sold
2,700,000
Less: Administrative Expenses
Less Depreciation
Earnings Before Interest and Taxes
Less: Interest Expense
700,000
682.000
(682,000)
120.000
(802,000)
(280,000)
(522,000)
Taxable Income
Less: Taxes
Net Income
Dividends
Addition to Retained Earmings
(522,000)
Required: Evaluate the performance of Big Rock Paving Company using the below
ratios. Define cach ratio, perform the calculation, and provide an explanation of the
result.
Transcribed Image Text:Q5. Analysis of Financial Statements There was a bit of concem about one of Big Rock's newer entities - Big Rock Paving Company. Management wants you to review the two financial statements below and give your analysis of the company's performance. Big Rock Paving Company Assets Liabilities Current Assets: Current Liabilities: Cash 500,000 Accounts Payable 300,000 Notes Payable 700,000 Accounts Receivable 500,000 Inventory 800,000 Total Current Assets 1,300,000 Total Current Liabilities 1,200,000 Owners' Equity 2,200,000 Common Stock ($1 Par) 600,000 Capital Surplus 1,600,000 Retained Earnings 2,900,000 Total Owners' Equity Fixed Assets: Property, Plant & Equipment Less: Accumulated Depreciation 600,000 100,000 Net Fixed Assets 100,000 Total Assets 800,000 Total Liabilities and Owners Equity 2,900,000 Big Rock Paving Company Income Statement for Year Ending December 31, 2021 Sales 3,400,000 Less: Cost of Goods Sold 2,700,000 Less: Administrative Expenses Less Depreciation Earnings Before Interest and Taxes Less: Interest Expense 700,000 682.000 (682,000) 120.000 (802,000) (280,000) (522,000) Taxable Income Less: Taxes Net Income Dividends Addition to Retained Earmings (522,000) Required: Evaluate the performance of Big Rock Paving Company using the below ratios. Define cach ratio, perform the calculation, and provide an explanation of the result.
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