Financial Accounting
9th Edition
ISBN: 9781259222139
Author: Robert Libby, Patricia Libby, Frank Hodge Ch
Publisher: McGraw-Hill Education
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 13.1E
Using Financial Information to Identify Companies
The following selected financial data pertain to four unidentified companies:
| COMPANIES | ||||
| 1 | 2 | 3 | 4 | |
| Balance Sheet Data (component percentage) | ||||
| Cash | 3.5% | 4.7% | 8.2% | 11.7% |
| Accounts lecci sable | 16.9 | 28.9 | 16.8 | 51.9 |
| Inventory | 46.8 | 35.6 | 57.3 | 0.0 |
| Property and equipment | 18.3 | 21.7 | 7.6 | 18.7 |
| Income Statement Data (component percentage) | ||||
| Cost of goods sold | 78.0% | 77.5% | 55.8% | 0.0% |
| Profit before taxes | 2.1 | 0.7 | 1.2 | 3.2 |
| Selected Ratios | ||||
| 1.3 | 1.5 | 1.6 | 1.2 | |
| Inventory turnover ratio | 3.6 | 9.8 | 1.5 | N/A* |
| *N/A = Not applicable | ||||
The above financial information pertains to the follow ing companies:
- a. High-end clothing store
- b. Advertising agency
- c. Wholesale candy company
- d. Car manufacturer
Required:
Match each company with its financial information.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Evaluating Financials and Ratios
From Chapter 17
1. From the data given in the following table, please construct as many of the financial ratios
discussed in this chapter as you can and then indicate what dimension of a business firm's
performance each ratio represents.
Cash account
Accounts receivable
Inventories
Fixed assets
Miscellaneous assets
Cost of goods sold
Wages and salaries
Interest expense
Overhead expenses
Depreciation expenses
Selling, administrative,
and other expenses
108 Before-tax net income
117* Taxes owed
325*
After-tax net income
15
160
725
*Annual principal payments on bonds and notes payable total $55. The firm's marginal tax rate is 35 percent.
Short-term debt:
Accounts payable
Notes payable
Long-term debt (bonds)
Equity capital
A.
Business Assets
B.
C.
D.
The financial ratios that could be computed given the data in this problem fall under the
following categories:
E.
F.
Liabilities and Equity
G.
Annual Revenue and Expense Items
$60 Net sales
155
128
286
96
725…
A common-size balance sheet shows the firm's assets and liabilities as a percentage of ____.
a.
stockholders' equity
b.
total assets
c.
industry averages
d.
net sales
performance of National Company. Comment on overall financial position and financial health of the business. Identify problems and recommend possible solutions, if historical ratios of company are:
Ratios201720182019
Current Ratio1.41.51.6
Acid Test Ratio0.850.740.63
Asset Turnover Ratio4 times3.22.5
Inventory Turnover Ratio6 times5.55
Collection Period6 times5.55
Account payable turnover8 times10 times12 times
Total Debt to equity Ratio1.381.611.91
Interest cover543.5
Gross Profit Ratio20%22%23%
Net Profit Margin8.5%6.7%3.8%
Return on Equity20%21%24%
Sales Growth Rate8%5%2%
P/E Ratio1098
Fixed Asset Utilization Ratio21.71.4
Chapter 13 Solutions
Financial Accounting
Ch. 13 - Who are the primary users of financial statements?Ch. 13 - When considering an investment in stock, investors...Ch. 13 - How does product differentiation differ from cost...Ch. 13 - What are the two general methods for making...Ch. 13 - What are component percentages? Why are they...Ch. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What do profitability ratios focus on? What is an...Ch. 13 - What do turnover ratios focus on? What is an...Ch. 13 - What do liquidity ratios focus on? What is an...Ch. 13 - What do solvency ratios focus on? What is an...
Ch. 13 - What do market ratios focus on? What is an example...Ch. 13 - Prob. 12QCh. 13 - Explain why rapid growth in total sales might not...Ch. 13 - A company has total assets of 500,000 and...Ch. 13 - Prob. 2MCQCh. 13 - Prob. 3MCQCh. 13 - Prob. 4MCQCh. 13 - Prob. 5MCQCh. 13 - Prob. 6MCQCh. 13 - Prob. 7MCQCh. 13 - Prob. 8MCQCh. 13 - Prob. 9MCQCh. 13 - Prob. 10MCQCh. 13 - Prob. 13.1MECh. 13 - Prob. 13.2MECh. 13 - Prob. 13.3MECh. 13 - Computing the Financial Leverage Percentage...Ch. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Prob. 13.6MECh. 13 - Prob. 13.7MECh. 13 - Prob. 13.8MECh. 13 - Prob. 13.9MECh. 13 - Prob. 13.10MECh. 13 - Using Financial Information to Identify Companies...Ch. 13 - Prob. 13.2ECh. 13 - Prob. 13.3ECh. 13 - Prob. 13.4ECh. 13 - Prob. 13.5ECh. 13 - Prob. 13.6ECh. 13 - Prob. 13.7ECh. 13 - Prob. 13.8ECh. 13 - Prob. 13.9ECh. 13 - Prob. 13.10ECh. 13 - Inferring Financial Information from Ratios E13-11...Ch. 13 - Prob. 13.12ECh. 13 - Prob. 13.13ECh. 13 - Prob. 13.1PCh. 13 - Prob. 13.2PCh. 13 - Prob. 13.3PCh. 13 - Prob. 13.4PCh. 13 - Prob. 13.5PCh. 13 - Computing Comparative Financial Statements and...Ch. 13 - Analyzing Financial Statements Using Ratios Use...Ch. 13 - Prob. 13.8PCh. 13 - Prob. 13.9PCh. 13 - Prob. 13.1APCh. 13 - Prob. 13.2APCh. 13 - Calculating Profitability, Turnover, Liquidity,...Ch. 13 - Prob. 13.4APCh. 13 - Prob. 13.5APCh. 13 - Prob. 13.6APCh. 13 - Prob. 13.1CPCh. 13 - Prob. 13.2CPCh. 13 - Comparing Companies within an Industry Refer to...Ch. 13 - Prob. 13.4CPCh. 13 - Inferring Information from the DuPont Model Ratios...Ch. 13 - Prob. 13.6CP
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- ANALY SIS OF PROFITABILITY Based on the financial statement data in Exercise 24-1A, compute the following profitability measures for 20-2 (round all calculations to two decimal places): (a) Profit margin ratio (b) Return on assets (c) Return on common stockholders equity (d) Earnings per share of common stockarrow_forwardBelow are the two basic financial statements of Chiz Trading Company. You are tasked to prepare an analysis using Horizontal and Vertical Analysis of their two-dated financial statements. In addition to this you have been tasked to prepare financial ratios measuring the company’s: Liquidity Status Current Ratios Quick Asset Ratios Efficiency Status Asset Turnover Fixed Asset Turnover Inventory Turnover Days in Inventory Accounts Receivable Turnover Days in Receivable Profitability Status: Gross Profit margin Ratio Operating Income Ratio Net Profit Ratio Return on Assets Return on Equityarrow_forwardIncome statements for Walton Company for Year 3 and Year 4 follow: WALTON COMPANY Income Statements. Sales Cost of goods sold. Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income Required A Required B Year 4 $200, 300 143,300 20,900 12,900 3,200 Required a. Perform a horizontal analysis, showing the percentage change in each income statement component between Year 3 and Year 4. b. Perform a vertical analysis, showing each income statement component as a percentage of sales for each year. Sales Cost of goods sold Selling expenses Administrative expenses Interest expense Total expenses Income before taxes Income taxes expense Net income $180,300 $160,300 20,000 20,000 3,300 5,600 $ 14,400 $ 16,700 Complete this question by entering your answers in the tabs below. Year 3 $180,300 X Answer is complete but not entirely correct. Perform a vertical analysis, showing each income statement component as a percentage of…arrow_forward
- Activity 4: Compute the following financial ratios using the given financial statements below. Round off your answer to the nearest hundreds a. Gross profit ratio b. Operating income ratio c. Net profit ratio d. Return on asset (ROA) e. Return on equity (ROE) f. Asset turnover g. Fixed asset turnover h. Inventory turnover i.Days in Inventory j.Accounts receivables turnoverarrow_forwardPlease use the financial ratios below to evaluate and each company’s performance relative to the other three companies in the industry. Please be more specific. Net profit margin Total asset turnover Assets-to-Equity Ratio ROE Axel Co. 19% 1.53 3.4 98.8% Blue Co 6% 1.88 1.6 18.0% Carol Co. 10% 1.00 1.06 10.6% David Co. 4% 1.11 1.8 8.0%arrow_forwardIdentify which of the following six metrics a through f best completes questions 1 through 3 below. a. Days’ sales uncollected d. Return on total assets b. Accounts receivable turnover e. Total asset turnover c. Working capital f. Profit margin 1. Which two ratios are key components in measuring a company’s operating efficiency? Which ratio summarizes these two components? 2. What measure reflects the difference between current assets and current liabilities? 3. Which two short-term liquidity ratios measure how frequently a company collects its accounts?arrow_forward
- Single-Step Income Statement The following income statement items, arranged in alphabetical order, are taken from the records of Corbin Enterprises for the current year: Required Prepare a single-step income statement for the current year. What weaknesses do you see in this form for the income statement?arrow_forwardEffect of Industry Characteristics on Financial Statement Relations. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.22 (pages 6061) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.22 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large enough for the firm to disclose it. Amounts that are not meaningful are shown as n.m. A list of the 12 companies and a brief description of their activities follow. A. Amazon.com: Operates websites to sell a wide variety of products online. The firm operated at a net loss in all years prior to that reported in Exhibit 1.22. B. Carnival Corporation: Owns and operates cruise ships. C. Cisco Systems: Manufactures and sells computer networking and communications products. D. Citigroup: Offers a wide range of financial services in the commercial banking, insurance, and securities business. Operating expenses represent the compensation of employees. E. eBay: Operates an online trading platform for buyers to purchase and sellers to sell a variety of goods. The firm has grown in part by acquiring other companies to enhance or support its online trading platform. F. Goldman Sachs: Offers brokerage and investment banking services. Operating expenses represent the compensation of employees. G. Johnson Johnson: Develops, manufactures, and sells pharmaceutical products, medical equipment, and branded over-the-counter consumer personal care products. H. Kelloggs: Manufactures and distributes cereal and other food products. The firm acquired other branded food companies in recent years. I. MGM Mirage: Owns and operates hotels, casinos, and golf courses. J. Molson Coors: Manufactures and distributes beer. Molson Coors has made minority ownership investments in other beer manufacturers in recent years. K. Verizon: Maintains a telecommunications network and offers telecommunications services. Operating expenses represent the compensation of employees. Verizon has made minority investments in other cellular and wireless providers. L. Yum! Brands: Operates chains of name-brand restaurants, including Taco Bell, KFC, and Pizza Hut. REQUIRED Use the ratios to match the companies in Exhibit 1.22 with the firms listed above.arrow_forwardThe metrics based on financial numbers produced by the accounting system are ________. A. quantitative factors B. qualitative factors C. stakeholders D. stockholdersarrow_forward
- Effect of Industry Characteristics on Financial Statement Relations. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.23 (pages 6263) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.23 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies and a brief description of their activities follow. A. Abercrombie Fitch: Sells retail apparel primarily through stores to the fashionconscious young adult and has established itself as a trendy, popular player in the specialty retailing apparel industry. B. Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles. Operating revenues include insurance premiums from customers and revenues earned from investments made with cash received from customers before Allstate pays customers claims. Operating expenses include amounts actually paid or expected to be paid in the future on insurance coverage outstanding during the year. C. Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment equipment at competitively low prices. D. E. I. du Pont de Nemours: Manufactures chemical and electronics products. E. Hewlett-Packard: Develops, manufactures, and sells computer hardware. The firm outsources manufacturing of many of its computer components. F. HSBC Finance: Lends money to consumers for periods ranging from several months to several years. Operating expenses include provisions for estimated uncollectible loans (bad debts expense). G. Kelly Services: Provides temporary office services to businesses and other firms. Operating revenues represent amounts billed to customers for temporary help services, and operating expenses include amounts paid to the temporary help employees of Kelly. H. McDonalds: Operates fast-food restaurants worldwide. A large percentage of McDonalds restaurants are owned and operated by franchisees. McDonalds frequently owns the restaurant buildings of franchisees and leases them to franchisees under long-term leases. I. Merck: A leading research-driven pharmaceutical products and services company. Merck discovers, develops, manufactures, and markets a broad range of products to improve human and animal health directly and through its joint ventures. J. Omnicom Group: Creates advertising copy for clients and is the largest marketing services firm in the world. Omnicom purchases advertising time and space from various media and sells it to clients. Operating revenues represent commissions and fees earned by creating advertising copy and selling media time and space. Operating expenses includes employee compensation. K. Pacific Gas Electric: Generates and sells power to customers in the western United States. L. Procter Gamble: Manufactures and markets a broad line of branded consumer products. REQUIRED Use the ratios to match the companies in Exhibit 1.23 with the firms listed above.arrow_forwardReturn on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): What is Tootsie Roll’s percent of the cost of sales to sales? Round to one decimal place.arrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage Learning
Century 21 Accounting Multicolumn JournalAccountingISBN:9781337679503Author:GilbertsonPublisher:Cengage
Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub
College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
Cornerstones of Financial Accounting
Accounting
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Cengage Learning
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:9781337679503
Author:Gilbertson
Publisher:Cengage
Managerial Accounting
Accounting
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:South-Western College Pub
College Accounting, Chapters 1-27
Accounting
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:Cengage Learning,
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License