Corporate Financial Accounting
Corporate Financial Accounting
15th Edition
ISBN: 9781337398169
Author: Carl Warren, Jeff Jones
Publisher: Cengage Learning
Question
Chapter 1, Problem 1.1MAD

a)

To determine

To Compute: The ratio of liabilities to stockholders' equity of Company A and Company B.

b)

To determine

To derive: A conclusion regarding the margin of protection to the creditors from the ratio of liabilities to stockholders' equity of Company A and Company B.

Blurred answer
Students have asked these similar questions
1.  Using the financial statements for the following three companies calculate their current and quick ratios. wsj.com/market-data/quotes/CA/RUS/financials/annual/balance-sheet (Russel Metals Inc.) https://finance.yahoo.com/quote/AAPL/balance-sheet?p=AAPL (Apple) https://finance.yahoo.com/quote/AMZN/balance-sheet?p=AMZN (Amazon)   2.  After calculating the ratio assess each firm's liquidity and how they compare/contrast   3. if you were going to invest in one of these companies, which one would you choose and why?
DuPont identity.  For the firms in the popup​ window, LOADING... ​, find the return on equity using the three components of the DuPont​ identity: operating​ efficiency, as measured by the profit margin​ (net income/sales); asset management​ efficiency, as measured by asset turnover​ (sales/total assets); and financial​ leverage, as measured by the equity multiplier​ (total assets/total​ equity).       ​First, find the equity of each company. The equity for PepsiCo is ​$nothing million.  ​(Round to the nearest million​ dollars.)       Help Me Solve ThisView an Example  Get More Help  Clear All       Check Answer   Financial Information​ ($ in​ millions, 2013)   Company Sales Net Income Total Assets Liabilities   PepsiCo ​$66,352 ​$6,769 ​$77,328 ​$53,162 ​ Coca-Cola ​$46,818 ​$8,528 ​$90,042 ​$56,761 ​ McDonald's ​$28,089 ​$5,826 ​$36,544 ​$20,553 PrintDone
The company’s ratios are: Current ratio = 1.58% Quick ratio = 1.53% operating margin = 3.49% profit margin = 1.86% return on total assets (ROA) = 1.75% return on common equity (ROE) = 7.03% PE ratio = 24.50% You are an investor with a large sum of money (or a company looking for an investment) and buying either the company or shares of stock in the company is being considered.  Determine, based on the company’s financials and its future business prospects, whether you will invest in this company or not. In order to support your conclusions, be sure to reference your ratios and ratio analysis.

Chapter 1 Solutions

Corporate Financial Accounting

Ch. 1 - Cost principle On June 25, Ritts Roofing extended...Ch. 1 - Accounting equation Be-The-One is a motivational...Ch. 1 - Transactions Interstate Delivery Service is owned...Ch. 1 - Income statement The revenues and expenses of...Ch. 1 - Statement of stockholders equity Using the income...Ch. 1 - Balance sheet Using the following data for...Ch. 1 - Statement of cash flows A summary of cash flows...Ch. 1 - Ratio of liabilities to stockholders equity The...Ch. 1 - Prob. 1.1EXCh. 1 - Prob. 1.2EXCh. 1 - Prob. 1.3EXCh. 1 - Prob. 1.4EXCh. 1 - Prob. 1.5EXCh. 1 - Accounting equation Determine the missing amount...Ch. 1 - Accounting equation Inspirational Inc. is a...Ch. 1 - Asset, liability, and stockholders equity items...Ch. 1 - Effect of transactions on accounting equation What...Ch. 1 - Effect of transactions on accounting equation A. A...Ch. 1 - Effect of transactions on stockholders equity...Ch. 1 - Transactions The following selected transactions...Ch. 1 - Nature of transactions Teri West operates her own...Ch. 1 - Net income and dividends The income statement for...Ch. 1 - Net income and stockholders equity for four...Ch. 1 - Balance sheet items From the following list of...Ch. 1 - Balance sheet items From the following list of...Ch. 1 - Statement of stockholders equity Financial...Ch. 1 - Income statement Inuring Services was organized on...Ch. 1 - Prob. 1.20EXCh. 1 - Balance sheets, net income Financial information...Ch. 1 - Financial statements Each of the following items...Ch. 1 - Statement of cash flows Indicate whether each of...Ch. 1 - Statement of cash flows A summary of cash flows...Ch. 1 - Financial statements We-Sell Realty was organized...Ch. 1 - Transactions On April 1 of the current year,...Ch. 1 - Financial statements The assets and liabilities of...Ch. 1 - A Financial statements Seth Feye established...Ch. 1 - Transactions, financial statements On August 1,...Ch. 1 - Transactions; financial statements DLite Dry...Ch. 1 - Missing amounts from financial statements The...Ch. 1 - Transactions Amy Austin established an insurance...Ch. 1 - Financial statements The assets and liabilities of...Ch. 1 - Financial statements Jose Loder established Bronco...Ch. 1 - Transactions; financial statements On April 1,...Ch. 1 - Transactions; financial statements Bevs Dry...Ch. 1 - Missing amounts from financial statements The...Ch. 1 - Prob. 1CPCh. 1 - Prob. 1.1MADCh. 1 - Analyze The Home Depot for three years The Home...Ch. 1 - Analyze Lowes for three years Lowes Companies,...Ch. 1 - Compare The Home Depot and Lowes Using your...Ch. 1 - Compare Papa Johns and Yum! Brands The following...Ch. 1 - Prob. 1.1TIFCh. 1 - Prob. 1.2TIFCh. 1 - Prob. 1.4TIFCh. 1 - Net income On January 1, 20Y5, Dr. Marcie Cousins...Ch. 1 - Prob. 1.6TIF
Knowledge Booster
Similar questions
  • Read the table below for 3 firms: a bubble tea store, a bike store, a consulting firm.   Company   A B C Debt-Equity Ratio 0.2 0.3 0.5 Inventory Turnover 4 60 -- Current Ratio 1.8 0.9 1.28 Net Profit Margin 3.8% 6.4% 20% Receivables turnover 30.0 -- 6.0 (a) Distinguish each company and discuss the reason for your identification. (b) Judge whether the following statement is true and explain your answer:“If the managers focus on the current stock value, they will tend to overemphasize short-term profits at the expense of long-term profits.”
    Match the following ratio functions with the ratio (place the number of your chosen answer into the box with the border beside the term you think it goes with : Dividend Yield   Debt ratio   Current Ratio   Price/Earnings Ratio   Acid-test ratio   Earnings per share     1.  The amount of net income earned for each share of the company's common stock 2. The percentage of a stock's market value returned to stockholders as dividends each period 3. The ability to pay current liabilities with current assets. 4. The percentage of assets financed with debt. 5. The ability to pay all current liabilities if they come due immediately. 6. The market price of $1 of earnings.
    Complete the common-size and common-base year financial statements [Income Statement (IS) and Balance Sheet (BS)] or Brady Corp. Include spark lines to easily show the trends.  Write a brief analysis in the Excel worksheet of the main trends that you notice.  Perform the 3 step DuPont Return on Equity (ROE) analysis for Brady Corp. using cell references. Write a brief analysis from the DuPont analysis on Excel worksheet.
  • 5. Stockholders' equity The right side of the balance sheet shows the firm’s liabilities and stockholders’ equity. Which of the following best describes shareholders’ equity? Equity is the difference between the company’s assets and liabilities.   Equity is the initial claim on value of the assets before the firm pays off its liabilities.     NOW Inc. released its annual results and financial statements. Grace is reading the summary in the business pages of today’s paper. In its annual report this year, NOW Inc. reported a net income of $148 million. Last year, the company reported a retained earnings balance of $476 million, whereas this year it increased to $560 million. How much was paid out in dividends this year? $232 million   $4 million   $64 million   $325 million
    You are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011. Required:  (a) Calculate the ratios stated in the table below for HTS Software, Inc. for 2011  (b) Analyze the current financial position for the company from a time series and cross section    viewpoint.  (c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios. Historical and Industry Average Ratios HTS Software ,   Inc. Ratio 2010 2011 Industry2011 Current Ratio 2.6 — 2.7 Quick Ratio 1.8 — 1.75 Inventory Turnover 4.5 — 4.7 Average Collection Period 40days — 42 days Total Asset Turnover 1.2 — 1 Debt Ratio 20% — 21% Times Interest Earned 9 — 8.9 Gross Profit Margin 43% — 44% Operating Profit Margin 30% — 32% Net Profit Margin 20% — 21% Return on total assets 12% — 13% Return on Equity Price/Earnings Ratio…
    Compute the values of each of the ratios in Exhibit 5.27 for Starbucks for 2012. Starbucks had 749.3 million common shares outstanding at the end of fiscal 2012, and the market price per share was 50.71. For days accounts receivable outstanding, use only specialty revenues in your calculations, because accounts receivable are primarily related to licensing and food service operations, not the retail operations.
    Recommended textbooks for you
  • Financial And Managerial Accounting
    Accounting
    ISBN:9781337902663
    Author:WARREN, Carl S.
    Publisher:Cengage Learning,
    Corporate Financial Accounting
    Accounting
    ISBN:9781305653535
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
  • Financial Accounting: The Impact on Decision Make...
    Accounting
    ISBN:9781305654174
    Author:Gary A. Porter, Curtis L. Norton
    Publisher:Cengage Learning
    Century 21 Accounting Multicolumn Journal
    Accounting
    ISBN:9781337679503
    Author:Gilbertson
    Publisher:Cengage
    Fundamentals of Financial Management, Concise Edi...
    Finance
    ISBN:9781305635937
    Author:Eugene F. Brigham, Joel F. Houston
    Publisher:Cengage Learning
  • Financial And Managerial Accounting
    Accounting
    ISBN:9781337902663
    Author:WARREN, Carl S.
    Publisher:Cengage Learning,
    Corporate Financial Accounting
    Accounting
    ISBN:9781305653535
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial Accounting
    Accounting
    ISBN:9781337272124
    Author:Carl Warren, James M. Reeve, Jonathan Duchac
    Publisher:Cengage Learning
    Financial Accounting: The Impact on Decision Make...
    Accounting
    ISBN:9781305654174
    Author:Gary A. Porter, Curtis L. Norton
    Publisher:Cengage Learning
    Century 21 Accounting Multicolumn Journal
    Accounting
    ISBN:9781337679503
    Author:Gilbertson
    Publisher:Cengage
    Fundamentals of Financial Management, Concise Edi...
    Finance
    ISBN:9781305635937
    Author:Eugene F. Brigham, Joel F. Houston
    Publisher:Cengage Learning