Profitability Measures Match each computation to one of the profitability measures in the table. Profitability Measures Computations Asset turnover $8,250,000 ÷ [($5,785,000 + $5,595,000) ÷ 2] Return on total assets ($786,300 + $127,000) ÷ [($6,609,000 + $6,419,000) ÷ 2] - Return on stockholders' equity $786,300 ÷ [($4,019,000 + $3,818,050) ÷ 2] V Return on common stockholders' equity ($786,300 $65,000) ÷ [($3,531,500 + $3,390,240) ÷ 2] Earnings per share on common stock ($786,300 – $65,000) ÷ 250,000 shares Price-earnings ratio $35 ÷ $3.05 Dividends per share $175,000 ÷ 250,000 shares Dividend yield $0.70 ÷ $35 Comparative Income Statement Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Meas and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%. Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5 Increase/(Decrease) 20Υ6 20Y5 Amount Percentage Sales 8,250,000 $7,257,000 993,000 V 13.7 % Cost of goods sold -4,100,000 (3,444,000) 656,000 V 19 % Gross profit 4,150,000 $3,813,000 337,000 V 8.8 % Selling expenses $(1,451,000) % Administrative expenses (1,237,500) (1,101,500) 136,000 12.3 Total operating expenses $(2,552,500) % Operating income 1,097,500 $1,260,500 -163,000 v 12.9 Other expense (interest) -127,000 (120,600) 6,400 5.3 Income before income tax expense 970,500 $1,139,900 -169,400 V 14.9 Income tax expense -184,200 (178,200) 6,000 3.4 V % Net income 786,300 $961,700 -175,400 v 18.2
Profitability Measures Match each computation to one of the profitability measures in the table. Profitability Measures Computations Asset turnover $8,250,000 ÷ [($5,785,000 + $5,595,000) ÷ 2] Return on total assets ($786,300 + $127,000) ÷ [($6,609,000 + $6,419,000) ÷ 2] - Return on stockholders' equity $786,300 ÷ [($4,019,000 + $3,818,050) ÷ 2] V Return on common stockholders' equity ($786,300 $65,000) ÷ [($3,531,500 + $3,390,240) ÷ 2] Earnings per share on common stock ($786,300 – $65,000) ÷ 250,000 shares Price-earnings ratio $35 ÷ $3.05 Dividends per share $175,000 ÷ 250,000 shares Dividend yield $0.70 ÷ $35 Comparative Income Statement Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Meas and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%. Comparative Income Statement For the Years Ended December 31, 20Y6 and 20Y5 Increase/(Decrease) 20Υ6 20Y5 Amount Percentage Sales 8,250,000 $7,257,000 993,000 V 13.7 % Cost of goods sold -4,100,000 (3,444,000) 656,000 V 19 % Gross profit 4,150,000 $3,813,000 337,000 V 8.8 % Selling expenses $(1,451,000) % Administrative expenses (1,237,500) (1,101,500) 136,000 12.3 Total operating expenses $(2,552,500) % Operating income 1,097,500 $1,260,500 -163,000 v 12.9 Other expense (interest) -127,000 (120,600) 6,400 5.3 Income before income tax expense 970,500 $1,139,900 -169,400 V 14.9 Income tax expense -184,200 (178,200) 6,000 3.4 V % Net income 786,300 $961,700 -175,400 v 18.2
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter1: Accounting As A Form Of Communication
Section: Chapter Questions
Problem 1.15MCE
Related questions
Question
![Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take
the bet!
Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identifying the amounts in those computations. Look for other measures that use those
amounts.)
Liquidity and Solvency Measures
Computations
Working capital
$3,095,000 - $900,000
Current ratio
$3,095,000 ÷ $900,000
Quick ratio
$1,866,000 ÷ $900,000
Accounts receivable turnover
$8,250,000 ÷ [($714,000 + $740,000) ÷ 2]
Number of days' sales in receivables
[($714,000 + $740,000) ÷ 2]÷ ($8,250,000 ÷ 365)
Inventory turnover
$4,100,000 ÷ [($1,072,000 + $1,100,000) ÷ 2]
Number of days' sales in inventory
[($1,072,000 + $1,100,000) ÷ 2] ÷ ($4,100,000 ÷ 365)
Ratio of fixed assets to long-term liabilities $2,690,000 + $1,690,000
Ratio of liabilities to stockholders' equity
$2,590,000 + $4,019,000
Times interest earned
($970,500 + $127,000) ÷ $127,000
Cash
$823,000
Marketable securities
329,000
V
Accounts receivable (net)
714,000 V
Inventory
1,072,000
v
Prepaid expenses
157,000
V
Total current assets
3,095,000
v
Long-term investments
824,000
V
Property, plant, and equipment (net)
2,690,000
Total assets
6,609,000
Liabilities
Current liabilities
900,000
Long-term liabilities
1,690,000
Total liabilities
2,590,000
V
Stockholders' Equity
Preferred stock, $10 par
487,500
V
Common stock, $5 par
1,250,000
Retained earnings
2,281,500
Total stockholders' equity
4,019,000
Total liabilities and stockholders' equity
6,609,000 V](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7f613ef6-bc77-4800-a43c-fcc1024de9ae%2F80e9b881-b20e-4fa8-bc4d-ec012f1b94bd%2F3m3vktk_processed.png&w=3840&q=75)
Transcribed Image Text:Your friend, another accountant, has bet you that with your knowledge of accounting and just the computations for common analytical measures, you can figure out many aspects of a company's financial statements. You take
the bet!
Match each computation to one of the liquidity and solvency measures in the table. (Hint: Begin by looking for simple computations and identifying the amounts in those computations. Look for other measures that use those
amounts.)
Liquidity and Solvency Measures
Computations
Working capital
$3,095,000 - $900,000
Current ratio
$3,095,000 ÷ $900,000
Quick ratio
$1,866,000 ÷ $900,000
Accounts receivable turnover
$8,250,000 ÷ [($714,000 + $740,000) ÷ 2]
Number of days' sales in receivables
[($714,000 + $740,000) ÷ 2]÷ ($8,250,000 ÷ 365)
Inventory turnover
$4,100,000 ÷ [($1,072,000 + $1,100,000) ÷ 2]
Number of days' sales in inventory
[($1,072,000 + $1,100,000) ÷ 2] ÷ ($4,100,000 ÷ 365)
Ratio of fixed assets to long-term liabilities $2,690,000 + $1,690,000
Ratio of liabilities to stockholders' equity
$2,590,000 + $4,019,000
Times interest earned
($970,500 + $127,000) ÷ $127,000
Cash
$823,000
Marketable securities
329,000
V
Accounts receivable (net)
714,000 V
Inventory
1,072,000
v
Prepaid expenses
157,000
V
Total current assets
3,095,000
v
Long-term investments
824,000
V
Property, plant, and equipment (net)
2,690,000
Total assets
6,609,000
Liabilities
Current liabilities
900,000
Long-term liabilities
1,690,000
Total liabilities
2,590,000
V
Stockholders' Equity
Preferred stock, $10 par
487,500
V
Common stock, $5 par
1,250,000
Retained earnings
2,281,500
Total stockholders' equity
4,019,000
Total liabilities and stockholders' equity
6,609,000 V
![Profitability Measures
Match each computation to one of the profitability measures in the table.
Profitability Measures
Computations
Asset turnover
$8,250,000 ÷ [($5,785,000 + $5,595,000) ÷ 2]
Return on total assets
($786,300 + $127,000) ÷ [($6,609,000 + $6,419,000) ÷ 2]
Return on stockholders' equity
$786,300 ÷ [($4,019,000 + $3,818,050) ÷ 2]
Return on common stockholders' equity ($786,300 – $65,000) ÷ [($3,531,500 + $3,390,240) ÷ 2]
Earnings per share on common stock
($786,300 – $65,000) ÷ 250,000 shares
Price-earnings ratio
$35 ÷ $3.05
Dividends per share
$175,000 ÷ 250,000 shares
Dividend yield
$0.70 ÷ $35
Comparative Income Statement
Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Meas
and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only
round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%.
Comparative Income Statement
For the Years Ended December 31, 20Y6 and 20Y5
Increase/(Decrease)
20Y6
20Y5
Amount
Percentage
Sales
8,250,000 v
$7,257,000
993,000
13.7 V %
Cost of goods sold
-4,100,000
(3,444,000)
656,000
19 V %
Gross profit
4,150,000 V
$3,813,000
337,000
8.8
V %
Selling expenses
$(1,451,000)
$
%
Administrative expenses
(1,237,500)
(1,101,500)
136,000
12.3
%
Total operating expenses
$(2,552,500)
%
Operating income
1,097,500
$1,260,500
-163,000
12.9
%
Other expense (interest)
-127,000 v
(120,600)
6,400
5.3 V %
Income before income tax expense
970,500 v
$1,139,900
-169,400 V
14.9 V
%
Income tax expense
-184,200 V
(178,200)
6,000
3.4 V %
786,300 V
$961,700
-175,400 V
18.2 V %
Net income](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F7f613ef6-bc77-4800-a43c-fcc1024de9ae%2F80e9b881-b20e-4fa8-bc4d-ec012f1b94bd%2Ff0fxkm_processed.png&w=3840&q=75)
Transcribed Image Text:Profitability Measures
Match each computation to one of the profitability measures in the table.
Profitability Measures
Computations
Asset turnover
$8,250,000 ÷ [($5,785,000 + $5,595,000) ÷ 2]
Return on total assets
($786,300 + $127,000) ÷ [($6,609,000 + $6,419,000) ÷ 2]
Return on stockholders' equity
$786,300 ÷ [($4,019,000 + $3,818,050) ÷ 2]
Return on common stockholders' equity ($786,300 – $65,000) ÷ [($3,531,500 + $3,390,240) ÷ 2]
Earnings per share on common stock
($786,300 – $65,000) ÷ 250,000 shares
Price-earnings ratio
$35 ÷ $3.05
Dividends per share
$175,000 ÷ 250,000 shares
Dividend yield
$0.70 ÷ $35
Comparative Income Statement
Use the following comparative income statement form to enter amounts you identify from the computations on the Liquidity and Solvency Meas
and complete the horizontal analysis columns. Enter percentages as decimal amounts, rounded to one decimal place. When rounding, look only
round up. For example, for 32.048% enter 32.0%. For 32.058% enter 32.1%.
Comparative Income Statement
For the Years Ended December 31, 20Y6 and 20Y5
Increase/(Decrease)
20Y6
20Y5
Amount
Percentage
Sales
8,250,000 v
$7,257,000
993,000
13.7 V %
Cost of goods sold
-4,100,000
(3,444,000)
656,000
19 V %
Gross profit
4,150,000 V
$3,813,000
337,000
8.8
V %
Selling expenses
$(1,451,000)
$
%
Administrative expenses
(1,237,500)
(1,101,500)
136,000
12.3
%
Total operating expenses
$(2,552,500)
%
Operating income
1,097,500
$1,260,500
-163,000
12.9
%
Other expense (interest)
-127,000 v
(120,600)
6,400
5.3 V %
Income before income tax expense
970,500 v
$1,139,900
-169,400 V
14.9 V
%
Income tax expense
-184,200 V
(178,200)
6,000
3.4 V %
786,300 V
$961,700
-175,400 V
18.2 V %
Net income
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