Chapter 12, Problem 90PSA

### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Chapter
Section

### Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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# A Preparation of RatiosRefer to the financial statements for Twisted Company in Problem 12-88.Required:1. CONCEPTUAL CONNECTION Compute the asset efficiency ratios (rounded to two decimal places) for Twisted for 2019 and 2018 (in percentage terms, rounded to two decimal places). Indicate whether efliciency has changed.2. CONCEPTUAL CONNECTION Compute the profitability ratios (rounded to two decimial places) for Twisted for 2019 and 2018. Determine by how much Twisted’s profitability ratios have changed (in percentage terms, rounded to two decimal places) for the 2-year period.3. CONCEPTUAL CONNECTION Compute the debt management ratios (in percentage terms, rounded to two decimal places) for Twisted for 2018 and 2019. Discuss whether creditors are as secure in 2019 as they were in 2018.

To determine

(a)

Efficiency ratio means:

The efficiency ratio is normally used to break down how well an organization utilizes its assets and liabilities inside. An efficiency ratio can figure the turnover of receivables, the reimbursement of liabilities, the amount and use of value, and the general utilization of stock and apparatus.

To compute:

Compute the assets efficiency ratios for Twisted for 2019 and 2018.

Explanation

Assets efficiency ratio = net sale or revenueaverage assets

For 2019, Assets efficiency ratio = $51638$14581=3.54

Average assets = $16516+$126462=\$14581</

To determine

(b)

Profitability ratios are a class of budgetary measurements that are utilized to survey a business' capacity to create income in respect to its income, working costs, accounting report resources, and shareholders' equity after some time, utilizing information from a particular point in time.

To discuss:

Compute the profitability ratio for twisted for 2019 and 2018 also determine that how much Twised’s Profitability ratio changed or not.

To determine

(c)

A proportion of an organization’s debt to its absolute financing. The debt the board proportion estimates the amount of an organization’s tasks originates from debt rather than different types of financing, for example, stock or individual investment funds

To calculate:

Calculate the debt management ratios for twisted for 2018 and 2019. Discuss wether creditor are as secure in 2019 as they were in 2018.

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