CAB Co. (CAB), a publicly accountable company specializing in children’s clothing, activities, and toys, wishes to benchmark its financial results against industry leaders for the current fiscal year. CAB’s chief executive officer feels that benchmarking CAB’s results will help identify its strengths and weaknesses. Below is some information on CAB compared to the industry average: Ratio CAB Co. Industry average Current ratio 1.02 1.05 Gross margin 30% 33% Debt-to-equity 0.6 0.5 Return on equity 23% 20% Accounts receivable days 23 31 Earnings per share 2.03 2.84 Inventory days 24 26 Quick ratio 1.2 1.3 Required: Evaluate CAB’s liquidity compared to the industry average, using two Evaluate CAB’s profitability compared to the industry average, using three Evaluate CAB’s solvency compared to the industry average, using one Evaluate how well CAB manages its assets compared to the industry average, using two ratios.
CAB Co. (CAB), a publicly accountable company specializing in children’s clothing, activities, and toys, wishes to benchmark its financial results against industry leaders for the current fiscal year. CAB’s chief executive officer feels that benchmarking CAB’s results will help identify its strengths and weaknesses. Below is some information on CAB compared to the industry average: Ratio CAB Co. Industry average Current ratio 1.02 1.05 Gross margin 30% 33% Debt-to-equity 0.6 0.5 Return on equity 23% 20% Accounts receivable days 23 31 Earnings per share 2.03 2.84 Inventory days 24 26 Quick ratio 1.2 1.3 Required: Evaluate CAB’s liquidity compared to the industry average, using two Evaluate CAB’s profitability compared to the industry average, using three Evaluate CAB’s solvency compared to the industry average, using one Evaluate how well CAB manages its assets compared to the industry average, using two ratios.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter13: Emerging Topics In Managerial Accounting
Section: Chapter Questions
Problem 55P
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CAB Co. (CAB), a publicly accountable company specializing in children’s clothing, activities, and toys, wishes to benchmark its financial results against industry leaders for the current fiscal year. CAB’s chief executive officer feels that benchmarking CAB’s results will help identify its strengths and weaknesses.
Below is some information on CAB compared to the industry average:
|
Ratio |
CAB Co. |
Industry average |
|
|
1.02 |
1.05 |
|
Gross margin |
30% |
33% |
|
Debt-to-equity |
0.6 |
0.5 |
|
Return on equity |
23% |
20% |
|
|
23 |
31 |
|
Earnings per share |
2.03 |
2.84 |
|
Inventory days |
24 |
26 |
|
Quick ratio |
1.2 |
1.3 |
Required:
- Evaluate CAB’s liquidity compared to the industry average, using two
- Evaluate CAB’s profitability compared to the industry average, using three
- Evaluate CAB’s solvency compared to the industry average, using one
- Evaluate how well CAB manages its assets compared to the industry average, using two ratios.
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