MANAGERIAL ACCOUNTING >C<
3rd Edition
ISBN: 9781259948503
Author: Whitecotton
Publisher: MCG CUSTOM
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Chapter 13, Problem 12ME
To determine
(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.
To determine
(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
To determine
(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
To determine
(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
To determine
(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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Generally speaking, do the following indicate good news or bad news?a. Increase in times interest earned ratio.b. Decrease in days to sell.c. Increase in gross profit percentage.d. Decrease in EPS.e. Increase in fixed asset turnover ratio.
Using the statements provided
Calculate the following liquidity ratios:
Current ratio
Quick ratio
Calculate the following asset management ratios:
Average collection period
Inventory turnover
Fixed asset turnover
Total asset turnover
Calculate the following financial leverage ratios
Debt to equity ratio
Long-term debt to equity
Calculate the following profitability ratios:
Gross profit margin
Net profit margin
Return on assets
Return on stockholders’ equity
For example: you should present it like the text, or as:Gross margin = 1,933 divided by 8,689 = 22.2%
A competitor of ACME has for the same time period reported the following three ratios:
Current ratio 1.52Long-term debt to equity .25 or 25%Net profit margin .08 or 8%
Given these three ratios only which company is performing better on each ratio? Also overall who would you say has the best financial performance and position. Support your answer.
Methodology:• Based on the above information the consulting group will conduct ratio analysis for the following ratios:o Current ratio o Receivable’s turnover o Times’s interest earned o Profit margin o Days in inventory o Return on assets o Cash current debt coverage ratio • As a next step the group will compare the ratios calculated above with industry benchmarks. The benchmarks are indicated within brackets besides each ratio.o Current ratio (3 to 1) o Receivable’s turnover (13 times) o Times’s interest earned (9 times) o Profit margin (12%) o Days in inventory (50 days) o Return on assets (12%) o Cash current debt coverage ratio (2 times
Chapter 13 Solutions
MANAGERIAL ACCOUNTING >C<
Ch. 13 - Prob. 1QCh. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?
Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Why are some analyses called horizontal and others...Ch. 13 - Slow Cellar’s current ratio increased from 1.2 to...Ch. 13 - From last year to this year. Colossal Company’s...Ch. 13 - From last year to this year, Berry Barn reported...Ch. 13 - Prob. 10Q
Ch. 13 - Prob. 1MCCh. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Prob. 4MCCh. 13 - Prob. 5MCCh. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - Prob. 8MCCh. 13 - Prob. 9MCCh. 13 - Prob. 1MECh. 13 - Prob. 2MECh. 13 - Prob. 3MECh. 13 - Prob. 4MECh. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Prob. 8MECh. 13 - Prob. 9MECh. 13 - Prob. 10MECh. 13 - Prob. 11MECh. 13 - Prob. 12MECh. 13 - Prob. 13MECh. 13 - Prob. 14MECh. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Prob. 6ECh. 13 - Prob. 7ECh. 13 - Computing and Interpreting Liquidity Ratios...Ch. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Analyzing the Impact of Selected Transactions on...Ch. 13 - Prob. 15ECh. 13 - Prob. 1.1GAPCh. 13 - Prob. 1.2GAPCh. 13 - Prob. 2.1GAPCh. 13 - Prob. 2.2GAPCh. 13 - Prob. 2.3GAPCh. 13 - Prob. 2.4GAPCh. 13 - Prob. 2.5GAPCh. 13 - Prob. 2.6GAPCh. 13 - Prob. 2.7GAPCh. 13 - Prob. 2.8GAPCh. 13 - Prob. 3.1GAPCh. 13 - Prob. 3.2GAPCh. 13 - Prob. 3.3GAPCh. 13 - Prob. 4.1GAPCh. 13 - Prob. 4.2GAPCh. 13 - Prob. 4.3GAPCh. 13 - Prob. 5.1GAPCh. 13 - Prob. 5.2GAPCh. 13 - Prob. 5.3GAPCh. 13 - Prob. 5.4GAPCh. 13 - Prob. 6.1GAPCh. 13 - Prob. 6.2GAPCh. 13 - Prob. 7GAPCh. 13 - Prob. 1.1GBPCh. 13 - Prob. 1.2GBPCh. 13 - Prob. 2.1GBPCh. 13 - Prob. 2.2GBPCh. 13 - Prob. 2.3GBPCh. 13 - Prob. 2.4GBPCh. 13 - Prob. 2.5GBPCh. 13 - Prob. 2.6GBPCh. 13 - Prob. 2.7GBPCh. 13 - Prob. 2.8GBPCh. 13 - Prob. 3.1GBPCh. 13 - Prob. 3.2GBPCh. 13 - Prob. 3.3GBPCh. 13 - Prob. 4.1GBPCh. 13 - Prob. 4.2GBPCh. 13 - Prob. 4.3GBPCh. 13 - Prob. 5.1GBPCh. 13 - Prob. 5.2GBPCh. 13 - Prob. 5.3GBPCh. 13 - Prob. 5.4GBPCh. 13 - Prob. 6.1GBPCh. 13 - Prob. 6.2GBPCh. 13 - Prob. 7GBP
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