Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 13, Problem 13.3P
1.
To determine
Introduction:The accounting ratios of a company are calculated with the help of financial data presented in the financial statements of the company. Accounting ratios help in measuring the profitability and efficiency of the company.
To calculate: Return on sales, asset turnover and return on assets ratios for the year just completed.
2.
To determine
Introduction:The calculation of the asset turnover ratio is made to measure the efficiency of the company to use its assets in generating sales. The sales of the company are used to divide the average total assets to calculate the asset turnover ratio.
To calculate: The asset turnover ratio for next year to achieve a goal of a 20% increase in sales.
3.
To determine
Introduction:The calculation of return on assets is made to measure the efficiency of the company to earn net income by using the average total assets. The net income of the company is used to divide the average total assets to calculate the return on asset ratio.
To calculate: The amount of net income needed in next year to achieve a 15% return on total assets.
4.
To determine
Introduction:The accounting ratios of a company are calculated with the help of financial data presented in the financial statements of the company. Accounting ratios help in measuring the profitability and efficiency of the company.
The reasonableness of the company’s goals. Also, determine the points on which the company should focus to achieve its goals.
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Students have asked these similar questions
X Solutions , a division of XYZ Corporation buys and installs aluminum windows. For the most recent year, the division had the following performance targets:
Asset turnover
2.5
Profit margin
6%
Target rate of return on investments for Residual Income
13%
Cost of capital
10%
Income tax rate
40%
Actual information concerning the company's performance for last year follows:
Total assets at beginning of year
$3,600,000
Total assets at end of year
5,400,000
Total invested capital (annual average)
8,000,000
Sales
9,000,000
Variable operating costs
3,650,000
Direct fixed costs
4,770,000
Allocated fixed costs
675,000
1. Compute X Solutions ROI, was the performance of the division acceptable?
Cold Goose Metal Works Inc.’s income statement reports data for its first year of operation. The firm’s CEO would like sales to increase by 25% next year.
1.
Cold Goose is able to achieve this level of increased sales, but its interest costs increase from 10% to 15% of earnings before interest and taxes (EBIT).
2.
The company’s operating costs (excluding depreciation and amortization) remain at 70% of net sales, and its depreciation and amortization expenses remain constant from year to year.
3.
The company’s tax rate remains constant at 25% of its pre-tax income or earnings before taxes (EBT).
4.
In Year 2, Cold Goose expects to pay $200,000 and $1,922,063 of preferred and common stock dividends, respectively.
Complete the Year 2 income statement data for Cold Goose, then answer the questions that follow. Be sure to round each dollar value to the nearest whole dollar.
Cold Goose Metal Works Inc.
Income Statement for Year Ending December 31…
The Dry Wall Division reports the following operating data for the past two years:
Year 1
Year 2
Margin
12
%
?
Asset Turnover
3.0
2.0
Average operating assets
?
$
152,500
Net operating income
$
41,900
?
Stockholders’ equity
$
82,500
$
122,500
Sales
?
?
The return on investment at the Dry Wall Division was exactly the same in Year 1 and Year 2.Net operating income in Year 2 amounted to:
Multiple Choice
$41,900.
$30,000.
$36,600.
$54,900.
Chapter 13 Solutions
Financial Accounting: The Impact on Decision Makers
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