Required information [The following information applies to the questions displayed below.] Shown here are condensed income statements for two different companies (assume no income taxes). Sales Variable expenses (80%) Income before interest Interest expense (fixed) Net income Miller Company Weaver Company Sales Variable expenses (60%) Income before interest Interest expense (fixed) Net income Company Miller Company Weaver Company 4. What happens to each company's net income if sales decrease by 20%? (Round your answers to nearest whole percent.) Net income $ 1,400,000 1,120,000 280,000 60,000 $ 220,000 Decreases by Decreases by $ 1,400,000 840,000 560,000 340,000 $ 220,000 % %

Required information [The following information applies to the questions displayed below.] Shown here are condensed income statements for two different companies (assume no income taxes). Sales Variable expenses (80%) Income before interest Interest expense (fixed) Net income Miller Company Weaver Company Sales Variable expenses (60%) Income before interest Interest expense (fixed) Net income Company Miller Company Weaver Company 4. What happens to each company's net income if sales decrease by 20%? (Round your answers to nearest whole percent.) Net income $ 1,400,000 1,120,000 280,000 60,000 $ 220,000 Decreases by Decreases by $ 1,400,000 840,000 560,000 340,000 $ 220,000 % %

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter6: Accounting For Financial Management

Section: Chapter Questions

Problem 7P

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You are considering two possible companies for investment purposes. The following data is available for each company. Additional Information: Company A: Bad debt estimation percentage using the income statement method is 6%, and the balance sheet method is 10%. The $230,000 in Other Expenses includes all company expenses except Bad Debt Expense. Company B: Bad debt estimation percentage using the income statement method is 6.5%, and the balance sheet method is 8%. The $140,000 in Other Expenses includes all company expenses except Bad Debt Expense. A. Compute the number of days sales in receivables ratio for each company for 2019 and interpret the results (round answers to nearest whole number). B. If Company A changed from the income statement method to the balance sheet method for recognizing bad debt estimation, how would that change net income in 2019? Explain (show calculations). C. If Company B changed from the balance sheet method to the income statement method for recognizing bad debt estimation, how would that change net income in 2019? Explain (show calculations). D. What benefits do each company gain by changing their method of bad debt estimation? E. Which company would you invest in and why? Provide supporting details.
Macon Mills is a division of Bolin Products. Inc. During the most recent year, Macon had a net income of $40 million. Included in the income was interest expense of $2,800,000. The companys tax rate was 40%. Total assets were $470 million, current liabilities were $104,000,000, and $72,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon?
Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Refer to the information for Juroe Company on the previous page. Also, assume that Juroes total assets at the beginning of last year equaled 17,350,000 and that the tax rate applicable to Juroe is 40%. Required: Note: Round answers to two decimal places. 1. Calculate the average total assets. 2. Calculate the return on assets.
Single-Step Income Statement The following income statement items, arranged in alphabetical order, are taken from the records of Shaw Corporation for the current year: Required Prepare a single-step income statement for the current year. What weaknesses do you see in this form for the income statement?
Brandt Corporation had sales revenue of 500,000 for the current year. For the year, its cost of goods sold was 240,000, its operating expenses were 50,000, its interest revenue was 2,000, and its interest expense was 12,000. Brandts income tax rate is 30%. Prepare Brandts multiple-step income statement for the current year.
Single-Step Income Statement The following income statement items, arranged in alphabetical order, are taken from the records of Corbin Enterprises for the current year: Required Prepare a single-step income statement for the current year. What weaknesses do you see in this form for the income statement?
Grammatico Company has just completed its third year of operations. The income statement is as follows: Selected information from the balance sheet is as follows: Required: Note: Round answers to two decimal places. 1. Compute the times-interest-earned ratio. 2. Compute the debt ratio. 3. CONCEPTUAL CONNECTION Assume that the lower quartile, median, and upper quartile values for debt and times-interest-earned ratios in Grammaticos industry are as follows: How does Grammatico compare with the industrial norms? Does it have too much debt?
Comparing Two Companies in the Same Industry: Chipotle and Panera Bread This case should be completed after responding to the requirements in Decision Case 13-2. Refer to the financial statement information of Chipotle and Panera Bread reprinted at the back of the book. Required Using the format in Example 13-5, prepare common-size comparative income statements for 2014 and 2013, for Panera Bread. Use total revenues as the base (i.e., 100%). Round all percentages to the nearest one-tenth of a percent. The common-size comparative income statements indicate the relative importance of items on the statement. Compare the common-size income statements of Panera Bread and Chipotle. What are the most important differences between the two companies income statements? Using the format in Example 13-4, prepare common-size comparative balance sheets at the end of 2014 and 2013, for Panera Bread. Round all percentages to the nearest one-tenth of a percent. The common-size comparative balance sheets indicate the relative importance of items on the statement. Compare the common-size balance sheets of Panera Bread and Chipotle. What are the most important differences between the two companies balance sheets?
Shown here are condensed income statements for two different companies (assume no income taxes). Ellis CompanySales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240,000Variable expenses (50%) . . . . . . . . . . . . 120,000Income before interest . . . . . . . . . . . . . 120,000Interest expense (fixed) . . . . . . . . . . . . . 90,000Net income . . . . . . . . . . . . . . . . . . . . . . . $ 30,000 Seidel CompanySales . . . . . . . . . . . . . . . . . . . . . . . . . . . . $240,000Variable expenses (75%) . . . . . . . . . . . . 180,000Income before interest . . . . . . . . . . . . . 60,000Interest expense (fixed) . . . . . . . . . . . . . 30,000Net income . . . . . . . . . . . . . . . . . . . . . . . $ 30,000 Required 1. Compute times interest earned for Ellis Company and for Seidel Company. 2. What happens to each company’s net income if sales increase by 10%? 3. What happens to each company’s net income if sales increase by 40%? 4. What happens to each company’s net…