MANAGERIAL ACCT.W/ACCESS(MSU)
15th Edition
ISBN: 9781269917360
Author: Braun
Publisher: PEARSON C
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Textbook Question
Chapter 14, Problem 14.43ACT
Discussion & Questions
- 1. Describe horizontal analysis. Describe vertical analysis. What is each technique used for? How are the two methods similar? How are they different?
- 2. How is the
current ratio calculated? What is it used to measure? How is it interpreted? - 3. Assume a company has a current ratio of 2.0. List two examples of transactions that could cause the current ratio to increase. Also list two examples of transactions that could cause the current ratio to decrease.
- 4. What does the accounts receivable turnover measure? What does a relatively high accounts receivable turnover indicate about a company?
- 5. Describe the set of circumstances that could result in net income increasing while
return on investment (ROI) decreases. - 6. Suppose a company has a relatively high inventory turnover What does the high inventory turnover indicate about the company s short-term liquidity?
- 7. Describe at least four financial conditions that may signal financial trouble.
- 8. Describe at least two reasons that a company’s ratios might not be comparable overtime.
- 9. Compare and contrast the current ratio and the quick ratio.
- 10. Describe why book value per share of common stock may not be useful for investment analysis.
- 11. Find a recent annual report for a publicly held company in which you are interested. Summarize what sustainability information is provided in that annual report. Based on the sustainability information provided in the annual report, what measurements do you think the company might use to track its sustainability efforts? (You can use your imagination here; the actual sustainability measures are unlikely to be in the annual report.)
- 12. There are three components in the triple bottom line; people, planet, and profit. Which component do you think is most important? Why?
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Which of the following statements is not true of horizontal analysis?
a.Each item on a financial statement is compared with a total amount from the same statement.
b.It can be useful in analyzing trends.
c.Each item on a current financial statement is compared to the same item on an earlier statement.
d.It can be useful in interpreting the financial performance of a company.
Comparison:1. Observe the trend of revenues for both companies. Which company has higher revenue?2. Observe the gross margin for both companies. Which company is more profitable?3. Observe the operating expenses for both companies. Which company has more operating expenses?4. Observe the net income for both companies. Which company is more profitable?5. Which company is more profitable using this type of analysis?
Critically Discuss the two statements below.
A. Ratio is an expression of relationship between two or more items in mathematical terms. Ratio may be expressed as a:b (a is to b), in terms of simple fraction, integer, or percentage.
B. A Finance Manager can utilize financial ratios and completely analyse any firm's financial performance without the need for any further financial review via any other company's data.
Chapter 14 Solutions
MANAGERIAL ACCT.W/ACCESS(MSU)
Ch. 14 - Prob. 1QCCh. 14 - 2. (Learning Objective 1) A trend study compares...Ch. 14 - Prob. 3QCCh. 14 - Prob. 4QCCh. 14 - Prob. 5QCCh. 14 - Prob. 6QCCh. 14 - Prob. 7QCCh. 14 - Prob. 8QCCh. 14 - Prob. 9QCCh. 14 - Prob. 10QC
Ch. 14 - Prob. 14.1SECh. 14 - Prob. 14.2SECh. 14 - Prob. 14.3SECh. 14 - Prob. 14.4SECh. 14 - Prob. 14.5SECh. 14 - Prob. 14.6SECh. 14 - Prob. 14.7SECh. 14 - Prob. 14.8SECh. 14 - Prob. 14.9SECh. 14 - Prob. 14.10SECh. 14 - Prob. 14.11AECh. 14 - Prob. 14.12AECh. 14 - Prob. 14.13AECh. 14 - Prob. 14.14AECh. 14 - Prob. 14.15AECh. 14 - Prob. 14.16AECh. 14 - Prob. 14.17AECh. 14 - Prob. 14.18AECh. 14 - Prob. 14.19AECh. 14 - Prob. 14.20AECh. 14 - Prob. 14.21AECh. 14 - Prob. 14.22BECh. 14 - Prob. 14.23BECh. 14 - Prob. 14.24BECh. 14 - Prob. 14.25BECh. 14 - Prob. 14.26BECh. 14 - Prob. 14.27BECh. 14 - Prob. 14.28BECh. 14 - Prob. 14.29BECh. 14 - Prob. 14.30BECh. 14 - Prob. 14.31BECh. 14 - Prob. 14.32BECh. 14 - Prob. 14.33APCh. 14 - Prob. 14.34APCh. 14 - P14-35A Effect of transactions on ratios (Learning...Ch. 14 - Prob. 14.36APCh. 14 - Prob. 14.37APCh. 14 - Prob. 14.38BPCh. 14 - P14-39B Comprehensive analysis (Learning...Ch. 14 - Prob. 14.40BPCh. 14 - Prob. 14.41BPCh. 14 - Prob. 14.42BPCh. 14 - Discussion Questions 1. Describe horizontal...Ch. 14 - Prob. 14.45ACTCh. 14 - Prob. 14.46ACT
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- Find the working captital, Current ration :1, debt to assets ratio, free cash flow, earning per share for both companies. And aslo which company has better liquidity? and which company has better solvency.arrow_forwardWhich of the following statements is correct? Statement 1. Ratios are used to compare different companies in the same industry. Statement 2. Financial ratios are used to weigh and evaluate the operational performance of the company. Statement 3. Liquidity ratios indicate how fast a company can generate cash to pay bills. A. Statement 1 only. B. Statement 2 only. C. Statement 3 only. D. All of the statements are correct. E. None of the statement is correct.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
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- 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_forwardYour Task… Using your assigned financial statements calculate the required ratios below Indicate if the change from year to year is favorable or unfavorable. All values should be accurate to at least two decimal places. The expectation is to submit a professional report free of grammar and spelling errors and easy to read. Think of this as a menu you would be handing to a customer. All calculations are to be represented. Analysis of Profitability Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Sales to Total Assets Ratio Return on Total Assets Return on Equity Earnings Per Sharearrow_forwardI need help to determine the following; 5. For P & B Manufacturing to assess its profitability I need help to calculate the net profit margin percentage AND the return on equity. Include calculations and round answers to 2 decimal places.arrow_forward
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