FINANCIAL AND MANAGERIAL ACCTG W/ACC CRD
9th Edition
ISBN: 9781266515071
Author: Wild
Publisher: MCG CUSTOM
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Question
Chapter 10, Problem 3.2AA
1.
To determine
Concept Introduction
Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.
To Compute: The debt to equity ratio of Company S for the current and the prior year.
2.
To determine
Concept Introduction
Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.
Whether the financial structure of Company S in the current year is riskier or less risky as compared to the prior year.
3.
To determine
Concept Introduction
Debt-to-equity Ratio: The debt-to-equity (D/E) ratio measures a company's reliance on debt as the total liabilities are compared with the company’s shareholder equity. When the company has a larger D/E ratio, this denotes greater risk whereas when there is a low D/E ratio, this states that the company is not expanding well by using its funds.
Whether the financial structure of Company S in the current year is riskier or less risky as compared to Company A and Company G.
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Ratio and Ratio Formula
(in thousands)
2015
2014
2013
Current Industry Average
Liquidity
Current Ratio =Current Asset / Current Liability
9,900/6,300
1.57
1.61
1.62
1.63
Acid Test Ratio or Quick Ratio = (Cash + Marketable securities + Accounts receivable)/Current liabilities
(400+300+3,200)/6,300
0.62
0.64
0.63
0.68
Solvency
Times Interest Earned =Earnings before interest & taxes/interest expense, gross
(7,060+900)/900
8.84
8.55
8.5
8.45
Profitability
Profit margin on sales = net income/sales
7,060/30,500
14%
13.20%
12.10%
13.00%
Productivity
Asset turnover = sales/avg total assets
30,500/6,000+5,400)/2)
1.85
1.84
1.83
1.84
Inventory turnover = COGS/avg inv
17,600/ (6,000+5,400)/2)
3.09
3.17
3.21
3.18
Chapter 10 Solutions
FINANCIAL AND MANAGERIAL ACCTG W/ACC CRD
Ch. 10 - Prob. 1QSCh. 10 - Prob. 2QSCh. 10 - Prob. 3QSCh. 10 - Prob. 4QSCh. 10 - Prob. 5QSCh. 10 - Prob. 6QSCh. 10 - Prob. 7QSCh. 10 - Prob. 8QSCh. 10 - Prob. 9QSCh. 10 - Prob. 10QS
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