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The financial statements for Royale and Cavalier companies are summarized here: Cavalier Royale Company Company Balance Sheet Cash Accounts Receivable, Net Inventory Equipment, Net $ 31,000 61,000 122,000 562,000 146,000 $ 51,000 22,000 37,000 172,000 52,000 Other Assets Total Assets $ 922,000 $ 334,000 $ 132,000 202,000 486,000 $ 27,000 67,000 216,000 10,000 14,000 Current Liabilities Notes Payable (long-term) Common Stock (par $20) Additional Paid-In Capital Retained Earnings 56,000 46,000 Total Liabilities and Stockholders' Equity $ 922,000 $ 334,000 Income Statement $ 818,000 486,000 246,000 $ 86,000 $ 298,000 156,000 101,000 Sales Revenue Cost of Goods Sold Other Expenses Net Income $ 41,000 Other Data Per share price at end of year $ 18.00 $ 15.00 Selected Data from Previous Year $ 53,000 Accounts Receivable, Net Notes Payable (long-term) Equipment, Net Inventory Total Stockholders' Equity 202,000 562,000 101,000 588,000 $ 20,000 67,000 172,000 44,000 240,000 These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account. Required: 1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)

The financial statements for Royale and Cavalier companies are summarized here: Cavalier Royale Company Company Balance Sheet Cash Accounts Receivable, Net Inventory Equipment, Net $ 31,000 61,000 122,000 562,000 146,000 $ 51,000 22,000 37,000 172,000 52,000 Other Assets Total Assets $ 922,000 $ 334,000 $ 132,000 202,000 486,000 $ 27,000 67,000 216,000 10,000 14,000 Current Liabilities Notes Payable (long-term) Common Stock (par $20) Additional Paid-In Capital Retained Earnings 56,000 46,000 Total Liabilities and Stockholders' Equity $ 922,000 $ 334,000 Income Statement $ 818,000 486,000 246,000 $ 86,000 $ 298,000 156,000 101,000 Sales Revenue Cost of Goods Sold Other Expenses Net Income $ 41,000 Other Data Per share price at end of year $ 18.00 $ 15.00 Selected Data from Previous Year $ 53,000 Accounts Receivable, Net Notes Payable (long-term) Equipment, Net Inventory Total Stockholders' Equity 202,000 562,000 101,000 588,000 $ 20,000 67,000 172,000 44,000 240,000 These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account. Required: 1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
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The financial statements for Royale and Cavalier companies are summarized here: Cavalier Royale Company Company Balance Sheet $ 31,000 61,000 122,000 562,000 146,000 $ 51,000 22,000 37,000 172,000 52,000 Cash Accounts Receivable, Net Inventory Equipment, Net Other Assets Total Assets $ 922,000 $ 334,000 $ 27,000 $ 132,000 202,000 486,000 56,000 46,000 Current Liabilities Notes Payable (long-term) Common Stock (par $20) Additional Paid-In Capital Retained Earnings 67,000 216,000 10,000 14,000 Total Liabilities and Stockholders' Equity $ 922,000 $ 334,000 Income Statement $ 298,000 $ 818,000 486,000 246,000 Sales Revenue Cost of Goods Sold 156,000 101,000 Other Expenses Net Income $ 86,000 $ 41,000 Other Data Per share price at end of year $ 18.00 $ 15.00 Selected Data from Previous Year $ 53,000 202,000 562,000 101,000 588,000 $ 20,000 Accounts Receivable, Net Notes Payable (long-term) Equipment, Net 67,000 172,000 44,000 240,000 Inventory Total Stockholders' Equity These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account. Required: 1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)
Transcribed Image Text:The financial statements for Royale and Cavalier companies are summarized here: Cavalier Royale Company Company Balance Sheet $ 31,000 61,000 122,000 562,000 146,000 $ 51,000 22,000 37,000 172,000 52,000 Cash Accounts Receivable, Net Inventory Equipment, Net Other Assets Total Assets $ 922,000 $ 334,000 $ 27,000 $ 132,000 202,000 486,000 56,000 46,000 Current Liabilities Notes Payable (long-term) Common Stock (par $20) Additional Paid-In Capital Retained Earnings 67,000 216,000 10,000 14,000 Total Liabilities and Stockholders' Equity $ 922,000 $ 334,000 Income Statement $ 298,000 $ 818,000 486,000 246,000 Sales Revenue Cost of Goods Sold 156,000 101,000 Other Expenses Net Income $ 86,000 $ 41,000 Other Data Per share price at end of year $ 18.00 $ 15.00 Selected Data from Previous Year $ 53,000 202,000 562,000 101,000 588,000 $ 20,000 Accounts Receivable, Net Notes Payable (long-term) Equipment, Net 67,000 172,000 44,000 240,000 Inventory Total Stockholders' Equity These two companies are in the same business and state but different cities. Each company has been in operation for about 10 years. Both companies received an unqualified audit opinion on the financial statements. Royale Company wants to borrow $81,000 cash and Cavalier Company is asking for $36,000. The loans will be for a two-year period. Both companies estimate bad debts based on an aging analysis, but Cavalier has estimated slightly higher uncollectible rates than Royale. Neither company issued stock in the current year. Assume the end-of-year total assets and net equipment balances approximate the year's average and all sales are on account. Required: 1. Calculate the following ratios. (Use 365 days in a year. Round your intermediate calculations and final answers to 2 decimal places.)
Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin 10.51 % 13.76 % 2. Gross Profit Percentage 40.59 % 47.65 % 3. Fixed Asset Turnover 1.46 1.73 4. Return on Equity % % 5. Earnings per Share 6. Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover 7. Days to Collect 8. Inventory Turnover 8. Days to Sell 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets
Transcribed Image Text:Cavalier Ratio Royale Company Company Tests of Profitability: 1. Net Profit Margin 10.51 % 13.76 % 2. Gross Profit Percentage 40.59 % 47.65 % 3. Fixed Asset Turnover 1.46 1.73 4. Return on Equity % % 5. Earnings per Share 6. Price/Earnings Ratio Tests of Liquidity: 7. Receivables Turnover 7. Days to Collect 8. Inventory Turnover 8. Days to Sell 9. Current Ratio Tests of Solvency: 10. Debt-to-Assets
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