(a-1)
Liquidity ratios measure the short-term capacity of a company to pay its maturing obligations and to meet unanticipated requirements for cash. Liquidity ratios are
Solvency ratios
Solvency ratios measure the capacity of a company to sustain over a long period of time. Solvency ratios are debt to assets ratio, time interest earned ratio, and debt to equity ratio, and more.
To Compute: The working capital of M.
(a-2)
To Compute: The current ratio of M.
(a-3)
To Compute: The debt to assets ratio of M.
(a-4)
To Compute: The times interest earned ratio of M.
(b)
To Compute: The debt to assets ratio, of M after adjustment for Off-balance sheet lease.
To Discuss: The debt to assets ratio of M before, and after adjustment for Off-balance sheet lease.
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FINANCIAL ACCOUNTING: TOOLS WP ACCESS
- Below are the ratio results for Abcom for the year 2022. Performance Operating margin -18.66% Asset turnover 0.16 Return on Capital Employed -7.64% Working capital Inventory days 88.88 days Debtor days 46.18 days Trade creditor days 68.11 days Liquidity Current ratio 0.30 Acid test 0.25 Solvency Interest cover -2.56 Shareholder's view Return on equity 7.16% Required; Analyse and interpret the meaning of these results.arrow_forwardBased on the ratios below, which of the two companies is most liquid? Assume that both companies have approached you seeking a six-month (short-term) loan in the amount of 30% of the respective company’s current assets. You have but one loan to give. To which company do you grant the loan? Please discuss each ratio. COMPANY 1(Data from left to right: 2018, 2019) Accounts receivable turnover =Net Credit Sales/ Average Debtors =6643051 / 58752 =113.07 =6084766 / 71649 =84.92 Average Days to collect= 365 / Accounts receivable turnover =365 / 113.07= 3.22 365 / 84.92= 4.29 Inventory Turnover= COGS / Average Inventory = 3868119 / 954183 =4.05 =3559158 / 752562 =4.73 Average Inventory Period= 365 / Inventory Turnover = 365 / 4.05= 90.12 365 / 4.73 = 77.16 Company 2(Data years from left to right: 2018, 2019, 2020) Accounts Receivable turnover Ratio = ( Net Credit sales / Average Accounts receivable ) From table A (5/7) 184.15 143.98 129.22 Avg Days to…arrow_forwardCalculate the businesses financial ratio for 2015. Assume that Park Ridge had 18,000 in lease payment in 2015 use ratio analysis discussion to identify the applicable. Interpret the ratio. For analysis that the sector average data present in the ratio analysis sections are valid for 2015 ie: current ratio? Quick ratio? Cash ratio? Debt-equity ratio and equity multiplier? Total debt ratio?arrow_forward
- At year end 2015, Yung.com had notes payable of $1200, accounts payable of $3400, andlong-term debt of $3000. Corresponding entries for 2016 are $1600, $3000, and $2800.Asset values are below:Current Assets 2015 2016Cash $600 $300Marketable Securities 400 300Accounts Receivable 900 800Inventory 2000 2200Fixed AssetsNet Plant & Equipment $7000 $9000 1. Prepare the company’s balance sheets for the end of 2016 and 2015, respectively.Hint: you must calculate equity in order to balance! 2. Prepare an income statement for Yung.com for 2016. During the year 2016,Yung.com had sales of $1000, cost of goods sold of $400, depreciation of $100,and interest paid of $150. The tax rate is 34%.arrow_forwardHere are the 2018 and 2019 (incomplete) balance sheets for Newble Oil Corp. .1)What was the change in net working capital between 2018 and 2019? 2)If Newble issued $210 million of new long-term debt, how much debt must have been paid off during the year? (Enter your answer in millions.) BALANCE SHEET AT END OF YEAR (Figures in $ millions) Assets 2018 2019 Liabilities and Shareholders' Equity 2018 2019 Current assets $ 315 $ 445 Current liabilities $ 235 $ 245 Net fixed assets 1,250 1,445 Long-term debt 855 970arrow_forwardThe 2018 balance sheet of Dido Daffodil Depot, Inc., showed long-term debt of $2.9 million, and the 2019 balance sheet showed long-term debt of $3.1 million. The 2019 income statement showed an interest expense of $145,000. During 2019, the company had a cash flow to creditors of –$55,000, and the cash flow to stockholders for the year was $80,000. Suppose you also know that the firm’s net capital spending for 2019 was $1,330,000, and its change in net working capital was -$61,000. What was the firm’s 2019 operating cash flow (OCF)? Group of answer choices $1,430,000 $1,263,000 $1,365,000 $1,294,000 $1,520,000arrow_forward
- Based on all the ratios below, which of the two companies is most liquid? Assume that both companies have approached you seeking a six-month (short-term) loan in the amount of 30% of the respective company’s current assets. You have but one loan to give. To which company do you grant the loan? Please discuss each ratio. COMPANY 1 (date from 2018 left and 2019 right column) 1. Current Ratio= Current Assets / Current Liabilities =1271900 / 1247742 =1.02 =1100433 / 1119631 =0.98 2. Quick Ratio= Current Assets- Inventory- Prepaid Expenses / Current Liabilities =(1271900 - 124809 -954183 ) / 1247742 =0.155 =(1100433 -115136- 752562) / 1119631 =020 3. Accounts receivable turnover =Net Credit Sales/ Average Debtors =6643051 / 58752 =113.07 =6084766 / 71649 =84.92 4. Average Days to collect= 365 / Accounts receivable turnover =365 / 113.07= 3.22 365 / 84.92= 4.29 5. Inventory Turnover= COGS / Average Inventory = 3868119 / 954183 =4.05 =3559158 / 752562 =4.73 6.…arrow_forwardConsidering that the credit policy of Steward (Pty) Ltd is 90 days, which one of the following statements is true when analysing the debtor’s collection period? A. The debtor’s collection period improved from 2020 to 2021, and the company is still collecting debtors within their credit policy terms of 90 days. B. The debtor’s collection period improved from 2020 to 2021, which is also good for the cash flow of the company. C. The debtor’s collection period worsened from 2020 to 2021, and the company is not collecting debtors within their credit policy terms of 90 days. D. The debtor’s collection period worsened from 2020 to 2021, but debtor’s are collected within their credit policy terms of 90 days. E. The debtor’s collection period remained constant from 2020 to 2021.arrow_forwardHere are the abbreviated financial statements for Planner’s Peanuts: INCOME STATEMENT, 2019 Sales $ 8,600 Cost 7,100 Net income $ 1,500 BALANCE SHEET, YEAR-END 2018 2019 2018 2019 Assets $ 6,500 $ 7,000 Debt $ 853 $ 1,000 Equity 5,647 6,000 Total $ 6,500 $ 7,000 Total $ 6,500 $ 7,000 Assume the payout ratio is 50%. Calculate the internal growth rate where no external debt or equity is to be issued. Note: Do not round intermediate calculations. Enter your answer as a whole percent. Calculate the sustainable growth rate where the firm maintains a fixed debt ratio but issues no equity. Note: Do not round intermediate calculations. Enter your answer as a whole percent.arrow_forward
- Calculate the financial indicators of the firm Merck for the year 2018 and fill in the spaces marked in the table. Company Name: Year 2018 Chemicals and Allied Products Industry Ratios ………….. Solvency or Debt Ratios Merck J&J 2018 Debt ratio …. …. 0.47 Debt-to-equity ratio …. …. 0.38 Interest coverage ratio …. …. -9.43 Liquidity Ratios Current ratio …. …. 3.47 Quick ratio …. …. 2.12 Cash ratio …. …. 2.24 Profitability Ratios Profit margin …. …. -93.4% ROE (Return on equity), after tax …. …. -248.5 ROA (Return on assets) …. …. -146.5 Gross margin …. …. 55.3% Operating margin (Return on sales) …. …. -42.9% Activity or Efficiency Ratios Asset turnover …. …. 1.08 Receivables turnover (days) …. …. 16 Inventory turnover (days)…arrow_forwardSome recent financial statements for Smolira Golf Corporation follow. Find the following financial ratios for Smolira Golf Corporation (use year-end figures rather than average values where appropriate): (Enter the profitability ratio answers as a percent rounded to 2 decimal places, e.g., 32.16. Round the remaining answers to 2 decimal places, e.g., 32.16.) 1. Long-term Solvency Ratios 2020 2021 Total debt ratio times times Debt-equity ratio times times Equity multiplier times times 2. Times interest earned times Cash coverage ratio times 3. Profitability Ratios Profit margin % Return on Assets % Return on Equity %arrow_forwardIn 2017. Blue Bank announced a Returm on Equity (ROE) of 15% and a Returm onAssets (ROA) of 2%. The bank had total equity of £200 million at year-end 2017. Calculatethe 2017 values of total assets, total debt and the leverage ratio (equity multiplier) for BlueBankarrow_forward
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