Only answer fill in the blanks. Current Assets = Cash and equivalents + Accounts Receivable + InventoriesThe quick ratio is equal to . Plugging in the relevant values for current assets, current liabilities, and inventories (calculated using theprevious identity) yields a quick ratio of approximately 1.4583Suppose that Niles could reduce its DSO from 18.25 to 12.Given the formula for DSO from the video, as well as the same annual sales of $2,500,000, the new value accounts receivable (associated withthe new DSO) must be $20,547.95 , all else equal.The change (or the absolute value of the difference between the original and new values) in accounts receivable represents an amount ofapproximatelyin cash generated.As a result of the stock buy back, the ROA and ROE both increaseSuppose Niles uses the cash generated by the lower DSO to buy back common stock at book value, thus reducing common equity.As a result of this new, lower, DSO, total debtdebt/total capital ratio mustand total capital. This means that the total 1. Ratio Analysis (Formula Approach)Step 1: Quick Take: Ratio AnalysisRatio analysis is an important way of evaluating financial statements. Using ratios, instead of simply raw financial data, can help to make bettercomparisons of the strength of companies.There are many different kinds of ratios, which can be grouped into five general categories:1. Liquidity ratios: These ratios are used to analyze whether or not a firm is able to pay its short-term debts (typically maturing withinthe next year). Good liquidity ratios are needed to continue operations of the firm.2. Asset management ratios: These ratios are used to analyze the efficiency of asset use by a firm. Reasonable asset managementratios are required to sustain acceptable levels of net income.3. Debt management ratios: These ratios analyze how a firm has financed its assets, as well as whether or not the firm can repay itslong-term debt.4. Profitability ratios: These ratios analyze how profitable a firm is. These ratios take both asset and debt management ratios intoaccount to analyze overall return on equity.5. Market value ratios: These ratios analyze investor confidence in the firm, both now and into the future.Suppose one firm has acquired far too much inventory and capital equipment, leading to large excess capacity.Which of the following categories of ratios would likely be most appropriate for comparing these companies in this scenario?Asset management ratiosMarket value ratiosOO Debt management ratiosO Liquidity ratiosSuppose that you are given the following data for Niles Company :Note: The data and calculations are based on a 365-day year.Cash and equivalentsFixed assetsSalesNet incomeCurrent liabilitiesCurrent ratioDSOROE$225,000$650,000$2,500,000$112,500$240,0002.518.2512.00%

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Description: Only answer fill in the blanks. Current Assets = Cash and equivalents + Accounts Receivable + InventoriesThe quick ratio is equal to . Plugging in the relevant values for current assets, current liabilities, and inventories (calculated using theprevi

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The quick ratio is equal to Plugging in the relevant values for current assets, current liabilities, and inventories (calculated using the previous identity) yields a quick ratio of approximately 1.4583 Suppose that Niles could reduce its DSO from 18.25 to 12. Given the formula for DSO from the video, as well as the same annual sales of $2,500,000, the new value accounts receivable (associated with the new DSO) must be $20,547.95, all else equal. The change (or the absolute value of the difference between the original and new values) in accounts receivable represents an amount of approximately in cash generated. As a result of the stock buy back, the ROA and ROE both increase Suppose Niles uses the cash generated by the lower DSO to buy back common stock at book value, thus reducing common equity. As a result of this new, lower, DSO, total debt debt/total capital ratio must and total capital . This means that the total

The quick ratio is equal to Plugging in the relevant values for current assets, current liabilities, and inventories (calculated using the previous identity) yields a quick ratio of approximately 1.4583 Suppose that Niles could reduce its DSO from 18.25 to 12. Given the formula for DSO from the video, as well as the same annual sales of $2,500,000, the new value accounts receivable (associated with the new DSO) must be $20,547.95, all else equal. The change (or the absolute value of the difference between the original and new values) in accounts receivable represents an amount of approximately in cash generated. As a result of the stock buy back, the ROA and ROE both increase Suppose Niles uses the cash generated by the lower DSO to buy back common stock at book value, thus reducing common equity. As a result of this new, lower, DSO, total debt debt/total capital ratio must and total capital . This means that the total

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

Chapter10: Long-term Liabilities

Section: Chapter Questions

Problem 10.2DC

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You have been asked by your CEO to evaluate, analyse and calculate commonly used ratios relating to a company’s profitability, liquidity, solvency and management efficiency. Explain how do analysts use ratios to analyse a firm’s leverage? Which ratios convey more important information to a credit analyst those revolving around the levels of indebtedness or those measuring the ability to service debt? What is the relationship between a firm’s level of indebtedness and risk? What must happen in order for an increase in leverage to be successful? Discuss and illustrate all your answer.
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One of the most important applications of ratio analysis is to compare a company’s performance with that of other players in the industry or to compare its own performance over a period of time. Such analyses are referred to as a comparative analysis and trend analysis, respectively. A) A common size analysis requires the representation of financial statement data relative to a single financial statement item (or base account or value). What is the most commonly used base item for a common size balance sheet? Net income Earnings before interest and taxes Total assets Net sales Suppose you are conducting an analysis of the financial performance of Blue Hamster Manufacturing Inc. over the past three years. The company did not issue new shares during these three years and has faced some operational difficulties. The company has thus pilot tested some new forecasting strategies for better operations management. You have collected the company’s relevant…