Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 10.3ADM
Neiman Marcus and Kohl’s: Short-term liquidity analysis
Neiman Marcus Group is one of the largest luxury fashion retailers in the world. Kohl’s Corporation sells moderately priced private and national branded products through more than 1,100 department stores located throughout the United States. The current assets and current liabilities at the end of a recent year for both companies are as follows (in millions):
Neiman Marcus | Kohl’s | |
Current assets: | ||
Cash | $ 197 | $1,407 |
Inventories | 1,069 | 3,814 |
Other current assets | 144 | 477 |
Total current assets | $1,410 | $5,698 |
Current liabilities: | ||
Accounts payable | $ 375 | $1,511 |
Other current liabilities | 482 | 1,348 |
Total current liabilities | $ 857 | $2,859 |
A. Would an analysis of
B. Compute the quick ratio for both companies. (Round to the nearest decimal.)
C. Interpret your results.
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Current Position Analysis
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Current Position Analysis: PepsiCo, Inc., the parent company of Frito-Lay snack foods and Pepsi beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year (in millions)
Prior Year (in millions)
Cash and cash equivalents
$5,943
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Short-term investments, at cost
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Accounts and notes receivable, net
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Inventories
3,372
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Chapter 10 Solutions
Corporate Financial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Installment notes require equal periodic payments....Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Journalize period payroll The payroll register of...Ch. 10 - Prob. 10.4BECh. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Fixed asset purchases with note On June 30,...Ch. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Summary payroll data In the following summary of...Ch. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Prob. 10.17EXCh. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Prob. 10.2BPRCh. 10 - Wage and tax statement data and employer FICA tax...Ch. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3COPCh. 10 - Prob. 10.1ADMCh. 10 - Prob. 10.2ADMCh. 10 - Neiman Marcus and Kohls: Short-term liquidity...Ch. 10 - Cabelas and Dicks Sporting Goods: Short-term...Ch. 10 - Ethics in Action Tonya Latirno is a staff...Ch. 10 - Prob. 10.3TIF
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Forecasted Statements and Ratios Upton Computers makes bulk purchases of small computers, stocks them in conveniently located warehouses, ships them to its chain of retail stores, and has a staff to advise customers and help them set up their new computers. Uptons balance sheet as of December 31, 2018, is shown here (millions of dollars): Sales for 2018 were 350 million, and net income for the year was 10.5 million, so the firms profit margin was 3.0%. Upton paid dividends of 4.2 million to common stockholders, so its payout ratio was 40%. Its tax rate was 40%, and it operated at full capacity. Assume that all assets/sales ratios, (spontaneous liabilities)/sales ratios, the profit margin, and the payout ratio remain constant in 2019. a. If sales are projected to increase by 70 million, or 20%, during 2019, use the AFN equation to determine Uptons projected external capital requirements. b. Using the AFN equation, determine Uptons self-supporting growth rate. That is, what is the maximum growth rate the firm can achieve without having to employ nonspontaneous external funds? c. Use the forecasted financial statement method to forecast Uptons balance sheet for December 31, 2019. Assume that all additional external capital is raised as a line of credit at the end of the year and is reflected (because the debt is added at the end of the year, there will be no additional interest expense due to the new debt). Assume Uptons profit margin and dividend payout ratio will be the same in 2019 as they were in 2018. What is the amount of the line of credit reported on the 2019 forecasted balance sheets? (Hint: You dont need to forecast the income statements because the line of credit is taken out on the last day of the year and you are given the projected sales, profit margin, and dividend payout ratio; these figures allow you to calculate the 2019 addition to retained earnings for the balance sheet without actually constructing a full income statement.)
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Current Position Analysis
Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year(in millions)
Previous Year(in millions)
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Current Position Analysis
Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year(in millions)
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Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years:
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$21,243
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Sherwood, Inc., the parent company of Frito-Lay snack foods and Sherwood beverages, had the following current assets and current liabilities at the end of two recent years:
Current Year(in millions)
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Cash and cash equivalents
$2,463
$2,610
Short-term investments, at cost
1,749
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Accounts and notes receivable, net
5,560
4,971
Inventories
1,571
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Prepaid expenses and other current assets
523
516
Short-term obligations
279
2,964
Accounts payable
6,701
6,596
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1. Current ratio
fill in the blank 1
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2. Quick ratio
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fill in the blank 4
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Short-Term Liquidity Ratios
The financial statements for Puck Enterprises, a retailer, follow.
Puck Enterprises
Consolidated Income Statements
(millions of dollars except per share data)
December 31
2023
2022
2021
Revenues
$19,233
$17,927
$16,115
Costs and expenses:
Cost of retail sales, buying, and occupancy
$14,164
$13,129
$11,751
Selling, publicity, and administration
3,175
2,978
2,801
Depreciation
498
459
410
Interest expense, net
446
437
398
Taxes other than income taxes
343
313
283
Total costs and expenses
$18,626
$17,316
$15,643
Earnings before income taxes
$607
$611
$472
Provision for income taxes
232
228
171
Net earnings
$375
$383
$301
Puck Enterprises
Consolidated Balance Sheets
(millions of dollars)
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$521
$117
Accounts receivable
1,536
1,514
Merchandise inventories
2,497
2,618…
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Short-Term Liquidity Ratios
The financial statements for Puck Enterprises, a retailer, follow.
Puck Enterprises
Consolidated Income Statements
(millions of dollars except per share data)
December 31
2023
2022
2021
Revenues
$19,233
$17,927
$16,115
Costs and expenses:
Cost of retail sales, buying, and occupancy
$14,164
$13,129
$11,751
Selling, publicity, and administration
3,175
2,978
2,801
Depreciation
498
459
410
Interest expense, net
446
437
398
Taxes other than income taxes
343
313
283
Total costs and expenses
$18,626
$17,316
$15,643
Earnings before income taxes
$607
$611
$472
Provision for income taxes
232
228
171
Net earnings
$375
$383
$301
Puck Enterprises
Consolidated Balance Sheets
(millions of dollars)
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$521
$117
Accounts receivable
1,536
1,514
Merchandise inventories
2,497
2,618…
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Cash
$29,000
Short-term investments
49,400
Accounts receivable (net)
170,000
Inventory
200,000
Prepaid expenses
11,600
Current assets
$460,000
Bell Company’s current liabilities at the beginning of the year were $140,000 and during the yearits operating activities provided a cash flow of $60,000.a. What are the firm’s current liabilities on December 31? (Round to the nearest dollar.) $Answer
b. What is the firm’s working capital on December 31? $Answer
c. What is the quick ratio on December 31? (Round to two decimals.) Answer
d. What is Bell’s operating-cash-flow-to-current-liabilities ratio? (Round to two decimals.)
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Problem 1:
A company has got $500 in cash and cash equivalents, $300 in inventory and $200 in account receivables. The firm has long term assets of $500. The firm has accounts payables of $200. All other current liabilities total $400. The firm had sales of $10000, EBIT of $5000, interest expenses of $2000 and net income of $800. Compute the following ratios:
Current ratio
DSO
TIE
profit margin
Total asset turnover
Problem 2:
A firm has current liabilities of $500. Account receivables are $300 and inventory is $400. All other current assets equal $800. Long term assets are $5000, long term liabities are $2500, sales is $8000, EBIT is $2000, interest expenses are $600 and net income is $100. Compute the following ratios:
Current ratio
Debt ratio
TIE
ROA
DSO
Current ratio = total current assets/total current liabilities
Days Sales Outstanding (DSO) = (accounts receivable*365)/sales
Times Interest Earned (TIE) ratio = EBIT/interest expense
Total asset turnover = sales/total…
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1. The current asset of Naruto Inc. comprises only cash, accounts receivables, and inventory. The firm has a current ratio of 2, and a quick ratio of 1.8. The total liabilities of the company are P40,000 of which 50% is current. How much is the cash of Naruto Inc. if the accounts receivable balance shows a balance of P56,000?
2. On January 1, 2022, Watera Inc. has an inventory account has a balance of P450,000. During the year, Watera Inc. purchased P2,950,000 additional merchandise. On December 31, 2022, the inventory was counted and determined to have a balance of P925,000. What is the inventory turnover for 2022?
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Please give a detailed analysis of the financial statements given below for Joshua & White Technologies. Your analysis should include answers to the questions as follows (not limited to these questions):
Has the company’s liquidity position improved or worsened?
Has the company’s ability to manage its assets improved or worsened?
How has the company’s profitability changed during the last year?
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets
2019
2018
Cash and cash equivalents
$21,000
$20,000
Short-term investments
3,759
3,240
Accounts Receivable
52,500
48,000
Inventories
84,000
56,000
Total current assets
$161,259
$127,240
Net fixed assets
223,097
200,000
Total assets
$384,356
$327,240
Liabilities and equity
Accounts payable
$33,600
$32,000
Accruals
12,600
12,000…
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