MANAGERIAL ACCOUNTING >C<
3rd Edition
ISBN: 9781259948503
Author: Whitecotton
Publisher: MCG CUSTOM
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Chapter 13, Problem 7GAP
To determine
Introduction:
Accounting ratio helps in comparing two or more financial data of the financial statements of the company. It is used by various parties to measure the performance of the companies.
To choose:
The company which is best suitable for investment.
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- Your discussion and final investment decision should solely be based on the ratio analysis, although investors also use various non financial information in their investment decision-making.
Please take a look below at the two companies' financial ratios. Use the material your learned in the chapter to try and identify the industries these two companies operate in. You are going to be graded on the quality of your analysis and arguments (e.g. this ratio indicates that... and that ratio indicates the other,... and taken together these ratios indicate that.... (and so forth)) :
Company A
Company B
P/E Ratio: 30
Price/Sales: 6
Price/Book Value of Equity: 7.5
Profit Margin: 20%
Operating Margin: 25%
Return on Assets (ROA): 6%
Return On Equity (ROE): 25%
Current Ratio: 3
P/E Ratio: 17
Price/Sales: 0.6
Price/Book Value of Equity: 3
Profit Margin: 3%
Operating Margin: 5%
Return on Assets (ROA): 7%
Return On Equity (ROE): 15%
Current Ratio: 1
Using the data in the following table for a number of firms in the same industry, do the following:
Firm
(in Millions of Dollars)
A
B
C
D
Sales
$15
$10
$15
$30
Net income after tax
1.75
0.50
2.00
1.50
Total assets
6.0
18.0
8.0
15.5
Stockholders' equity
13.0
10.0
6.0
5.0
Compute the total asset turnover, the net profit margin, the equity multiplier, and the return on equity for each firm. Round your answers to two decimal places.
A
B
C
D
Total Asset Turnover
x
x
x
x
Net Profit Margin
Equity Multiplier
x
x
x
x
Return on Equity
Evaluate each firm’s performance by comparing the firms with one another. Which firm has the lowest total asset turnover value?-Select-Firm AFirm BFirm CFirm DItem 17Which firm has the lowest net profit margin value?-Select-Firm AFirm BFirm CFirm DItem 18Which firm has the lowest equity multiplier value?-Select-Firm AFirm BFirm CFirm DItem 19Which firm has the lowest return on equity value?-Select-Firm…
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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