(a)
Introduction:
Time interest earned ratio measure the ability of the company to meet its obligations of debt. It is the ratio of operating income to interest expense.
To state:
If increase in time interest earned ratio is a good or bad news for the company.
(b)
Introduction:
The average days to sell inventory measures the number of days company takes to convert its inventory into assets.
To state:
If decrease in days to sell is a good or bad news for the company
(c)
Introduction:
Gross profit percentage helps the company to compare gross margin to the net sales. This ratio tells the profitability at which company sells its inventory.
To state:
If increase in gross profit percentage is a good or bad news for the company
(d)
Introduction:
Earnings per share (EPS) is profit of the company which isdividedby common stock per share. Earnings per share acts as an indicator of a company's profitability.
To state:
If decrease in EPS is a good or bad news for the company
(e)
Introduction:
Fixed Asset turnover ratio calculates the ability of a company to generate sales with the fixed assets. A decline in the ratio means company has overinvested the amount in the fixed assets.
To state:
If increase in fixed asset turnover ratio is a good or bad news for the company
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Managerial Accounting - With Access
- Define each of the following terms: Liquidity ratios: current ratio; quick, or acid test, ratio Asset management ratios: inventory turnover ratio; days sales outstanding (DSO); fixed assets turnover ratio; total assets turnover ratio Financial leverage ratios: debt ratio; times-interest-earned (TIE) ratio; EBITDA coverage ratio Profitability ratios: profit margin on sales; basic earning power (BEP) ratio; return on total assets (ROA); return on common equity (ROE) Market value ratios: price/earnings (P/E) ratio; price/cash flow ratio; market/book (M/B) ratio; book value per share Trend analysis; comparative ratio analysis; benchmarking DuPont equation; window dressing; seasonal effects on ratiosarrow_forwardReturn on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): The percent a company adds to its cost of sales to determine selling price is called a markup. What is Tootsie Roll’s markup percent? Round to one decimal place.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.) a. Profitability Ratios Profit margin % Return on Assets % Return on Equity % b. Asset utilization ratios: Total asset turnover times Inventory turnover times Receivables turnover timesarrow_forward
- REQUIRED:: Calculate the following Ratios: a) Gross Profit Margin b) Net Profit Margin c) Current Ratio d) Quick Acid Ratio e) Inventory Turnover Ratio (Days) f) Accounts Receivable Turnover Ratio g) Accounts Payable Turnover Ratio h) Debt ratio i) Return on Assets b) Explain the limitation of ratio in a businessarrow_forward1- Calulate the following liquidity ratio: a. Current Ratio b. Quick Ratio 2-Calulate the following asset management ratios a. Average collection period b. Inventory Turnover c. Fixed-asset turnover d. Total asset turnover 3. Calculate the following financial leverage management ratios: a. debt ratio b. Debt-to-equity ratio c. Times interest earned ratio d. Fixed-charge coverage ratio 4. Calculate the following profitablity leverage management ratios a. Gross profit margin b. Net profit margin c. Return on investment d. Return on Stockholders' equity 5. Calculate the following market-based ratios: a. Price-to-earnings ratio b. Market price-to-book value ratioarrow_forwarda. Efficiency ratios. b. Asset turnover ratios. c. Leverage ratios. d. Coverage ratios. Efficiency Ratios Inventory turnover ratio enter Inventory turnover ratio in times times Days sales in inventory enter Days sales in inventory days Accounts receivables turnover enter Accounts receivables turnover in times times DSO enter days sales outstanding days Asset Turnover Ratios Total asset turnover enter Total asset turnover in times times Fixed assets turnover enter Fixed assets turnover in times times Leverage Ratios Total debt ratio enter Total debt ratio in times times Debt to equity ratio enter Debt to equity ratio in times times Equity multiplier enter Equity multiplier in times times Coverage Ratios Times interest earned enter Times interest earned times Cash coverage enter Cash coverage in times timesarrow_forward
- What are three of the benefits of common-sized analysis using the inverse operating asset turnover (ATO) ratios? a) provides insight into the age of the assets b) the item is expressed as a percentage of current year sales c) is more comparable year-to-year than other methods d) negates the issue with small denominators e) it provides a common denominator for all accountsarrow_forwardFind the following financial ratios for LVMH Moet Hennessy Louis Vuitton SA (use year-end figures rather than average values where appropriate) (Round your answers to 2 decimal places (e.g., 32.16).) : 2015 2016 Short-term solvency ratios: Current ratio Quick ratio Cash ratio Asset utilization ratios: Total asset turnover Inventory turnover Receivables turnover Long-term solvency ratios: Total debt ratio Debt–equity ratio Equity multiplier Times interest earned ratio Profitability ratios: Profit margin % % Return on assets % % Return on equity % %arrow_forwardRequired: (a) You are required to calculate the following ratios:(i) Gross profit margin(ii) Operating profit margin(iii) Expenses to sales(iv) Return on Capital Employed(v) Asset turnover(vi) Non-current asset turnover(vii) Current Ratio(viii) Quick Ratio(ix) Inventory days(x) Receivables days(xi) Payable days(xii) Interest cover (b) In light of your calculations comment on the performance of the company over thelast two years.arrow_forward
- Discuss how, in choosing the accounting methods below, the following ratios can be affected – rate of return on assets, quick ratio, profit margin, asset turnover: (a) a change in accounting method for depreciation from straight line to reducing balance. (b)revaluation of a non-current asset upwards at the beginning of the current year. (c) providing for an expected loss through obsolescence of certain items of merchandise inventory.arrow_forwardCompare the performance of Fly X to the Industry. For each ratio, comment on whether Fly X is positive or negative relative to the Industry. Median Industry Fly X Ratios Current Ratio 1.43X 1.45 Quick Ratio 0.84X 0.88 Total Asset Turnover Ratio 0.85 1.30 Inventory Turnover Ratio 6.15 12.10 Average Inventory Ratio 59.35 30.17 Receivables Turnover 9.82 13.08 Average Collection Period 37.17 27.90 Debt Ratio 0.52 0.39arrow_forwardMost decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken. CAn you explain how to solve these not just the answers? 1. Issuance of long-term bonds 2. Issuance of short-term notes 3. Payment of accounts payable 4. Purchase of inventory on account 5. Purchase of inventory for cash 6. Purchase of equipment with a 4-year note 7. Retirement bonds 8. Sale of common stock 9. Write-off of obsolete inventory 10. Purchase of short-term investment for cash 11. Decision to refinance on a long-term basis some currently maturing debtarrow_forward
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