Bundle: Financial & Managerial Accounting, Loose-leaf Version, 14th + Working Papers For Warren/reeve/duchac's Corporate Financial Accounting, 14th + ... Financial & Managerial Accounting,
14th Edition
ISBN: 9781337802000
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 1ADM
Continuing Company Analysis-Amazon: Short-term liquidity analysis
Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Best Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions):
| Amazon | Best Buy | |
| Current assets: | ||
| Cash | $14,557 | $ 2,432 |
| Short-term investments | 2,859 | 1,456 |
| Accounts receivable | 5,612 | 1,280 |
| Inventories | 8,299 | 5,174 |
| Other current assets | — | 1,387 |
| Total current assets | $31,327 | $11,729 |
| Current liabilities: | ||
| Accounts payable | $16,459 | $ 5,122 |
| Other current liabilities | 11,630 | 2,314 |
| Total current liabilities | $28,089 | $ 7,436 |
A. Compute
B. Compute the
C. Compute the quick ratio for each company. (Round to one decimal place)
D. Can the working capital be usefully compared between the two companies? Explain.
E. Which company has the greater debt-paying ability according to the current ratio?
F. Which company has the greater short-term debt-paying ability according to the quick ratio?
G. Why are the results different between (E) and (F)? (Hint: Perform a vertical analysis of the current assets)
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Review problem—understanding liquidity measures Assume that the currentratio for Arch Company is 2.0, its acid-test ratio is 1.5, and its working capital is$300,000. Answer each of the following questions independently, always referring tothe original information.a. How much does the firm have in current liabilities?b. If the only current assets shown on the balance sheet for Arch Company areCash, Accounts Receivable, and Merchandise Inventory, how much does thefirm have in Merchandise Inventory?c. If the firm collects an account receivable of $100,000, what will its new currentratio and working capital be?d. If the firm pays an account payable of $100,000, what will its new current ratioand working capital be?e. If the firm sells inventory that was purchased for $50,000 at a cash price of$60,000, what will its new acid-test ratio be?
Financial Statement Ratio Analysis
The current year financial statements for two competitors are presented below. Please analyze their financials.
Note: if a ratio cannot be solved given the data provided, please leave it blank. There are a few ratios that cannot be solved given
the information provided.
Balance sheet:
Cash
Accounts receivable (net)
Inventory
Property & equipment (net)
Other assets
Total assets
Current liabilities
Long-term debt (interest rate: 15%)
Capital stock ($10 par value)
Additional paid-in capital
Retained earnings
Total liabilities and stockholders' equity
Income statement:
Sales revenue (1/2 on credit)
Cost of goods sold
Operating expenses
Net income
Other data:
Per share stock price at end of current year
Average income tax rate
Dividends declared and paid in current year
Profitability ratios:
1.
2.
3.
4.
5.
6.
Ratio
7.
8.
9.
Return on equity
Return on assets
Gross profit percentage
Net profit margin
Earnings per share
Quality of income
Asset turnover…
Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2015 (filed in October 2015).
a. Compute Costco's net profit margin, total asset turnover, and equity multiplier.
b. Verify the DuPont Identity for Costco's ROE.
c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be?
a. Compute Costco's net profit margin, total asset turnover, and equity multiplier.
The net profit margin is
%. (Round to two decimal places.)
The total asset turnover is
(Round to two decimal places.)
The equity multiplier is
(Round to two decimal places.)
b. Verify the DuPont Identity forCostco's ROE.
The ROE is %. (Round to two decimal places.)
c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be?
The total assets turnover should be
(Round to two decimal places.)
The total asset turnover should be
%
(Round to two decimal places and…
Chapter 10 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 14th + Working Papers For Warren/reeve/duchac's Corporate Financial Accounting, 14th + ... Financial & Managerial 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 - Prob. 8DQCh. 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 - Prob. 10.3BECh. 10 - Journalize payroll tax The payroll register of...Ch. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Prob. 10.1EXCh. 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 - Prob. 10.6EXCh. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Prob. 10.10EXCh. 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 - Pension plan entries Yuri Co. operates a chain of...Ch. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.21EXCh. 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 - Entries for payroll and payroll taxes The...Ch. 10 - Prob. 10.3BPRCh. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3CPPCh. 10 - Continuing Company Analysis-Amazon: Short-term...Ch. 10 - Prob. 2ADMCh. 10 - Prob. 3ADMCh. 10 - Prob. 4ADMCh. 10 - Prob. 10.1TIFCh. 10 - Prob. 10.3TIF
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