Managerial Accounting: Tools for Business Decision Making
7th Edition
ISBN: 9781118334331
Author: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
Publisher: WILEY
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Textbook Question
Chapter 14, Problem 14.4BYP
As the CPA for Gandara Manufacturing Inc., you have been asked to develop some key ratios from the comparative financial statements. This information is to be used to convince creditors that the company is solvent and will continue as a going concern. The data requested and the computations developed from the financial statements follow.
| 2017 | 2016 | |
| 3.1 times | 2.1 times | |
| Acid-test ratio | .8 times | 1.4 times |
| Asset turnover | 2.8 times | 2.2 times |
| Net income | Up 32% | Down 8% |
| Earnings per share | $3.30 | $2.50 |
Instructions
With the class divided into groups, complete the following.
Gandara Manufacturing Inc. asks you to prepare a list of brief comments stating how each of these items supports the solvency and going-concern potential of the business. The company wishes to use these comments to support its presentation of data to its creditors. You are to prepare the comments as requested, giving the implications and the limitations of each item separately. Then prepare a collective inference that may be drawn from the individual items about Gandara’s solvency and going-concern potential.
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Please find below Financial Statement extracts of Nestle from year 2017 and 2018. Based on this information please answer following question from a perspective of Financial Analyst (justify your answers with data as well the reason for choosing your ratios for your analysis) .The company’s total assets at year-end 2016 were CHF 131,900 million. What reasonable conclusions an analyst might make about the companies efficiency, Companies solvency, Liquidity and Profitability?
In millions of CHF
Notes
2018
2017 *
Sales
3
91,439
89,590
Cost of goods sold
(46,070)
(45,571)
Trading operating profit
3
13,789
13,277
Operating profit
13,752
10,156
Profit before taxes, associates and joint ventures
12,991
9,460
Taxes
13
(3,439)
(2,773)
Profit for the year
10,468
7,511
Notes
2018
2017 *
Assets
Current assets
Cash and cash equivalents
12/16…
You are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011.
Required:
(a) Calculate the ratios stated in the table below for HTS Software, Inc. for 2011
(b) Analyze the current financial position for the company from a time series and cross section viewpoint.
(c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios.
Historical and Industry Average Ratios
HTS Software , Inc.
Ratio
2010
2011
Industry2011
Current Ratio
2.6
—
2.7
Quick Ratio
1.8
—
1.75
Inventory Turnover
4.5
—
4.7
Average Collection Period
40days
—
42 days
Total Asset Turnover
1.2
—
1
Debt Ratio
20%
—
21%
Times Interest Earned
9
—
8.9
Gross Profit Margin
43%
—
44%
Operating Profit Margin
30%
—
32%
Net Profit Margin
20%
—
21%
Return on total assets
12%
—
13%
Return on Equity
Price/Earnings Ratio…
You are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011.
Required:
(a) Calculate the ratios stated in the table below for HTS Software, Inc. for 2011
(b) Analyze the current financial position for the company from a time series and cross section viewpoint.
(c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios.
Historical and Industry Average Ratios
HTS Software , Inc.
Ratio
2010
2011
Industry2011
Current Ratio
2.6
—
2.7
Quick Ratio
1.8
—
1.75
Inventory Turnover
4.5
—
4.7
Average Collection Period
40days
—
42 days
Total Asset Turnover
1.2
—
1
Debt Ratio
20%
—
21%
Times Interest Earned
9
—
8.9
Gross Profit Margin
43%
—
44%
Operating Profit Margin
30%
—
32%
Net Profit Margin
20%
—
21%
Return on total assets
12%
—
13%
Return on Equity
Price/Earnings Ratio…
Chapter 14 Solutions
Managerial Accounting: Tools for Business Decision Making
Ch. 14 - (a) Jose Ramirez believes that the analysis of...Ch. 14 - (a) Distinguish among the following bases of...Ch. 14 - Prob. 3QCh. 14 - Prob. 4QCh. 14 - Prob. 5QCh. 14 - Prob. 6QCh. 14 - Prob. 7QCh. 14 - What do the following classes of ratios measure?...Ch. 14 - What is the difference between the current ratio...Ch. 14 - Hizar Company, a retail store, has an accounts...
Ch. 14 - Which ratios should be used to help answer the...Ch. 14 - The price-earnings ratio of General Motors...Ch. 14 - What is the formula for computing the payout...Ch. 14 - Holding all other factors constant, indicate...Ch. 14 - Prob. 15QCh. 14 - Prob. 16QCh. 14 - Prob. 17QCh. 14 - Prob. 18QCh. 14 - Prob. 19QCh. 14 - Why is it important to report discontinued...Ch. 14 - You are considering investing in Wingert...Ch. 14 - Prob. 22QCh. 14 - Prob. 23QCh. 14 - You recently received a letter from your Uncle...Ch. 14 - Prob. 14.2BECh. 14 - Using the following data from the comparative...Ch. 14 - Using the same data presented above in BE14-3 for...Ch. 14 - Net income was 500,000 in 2016, 450,000 in 2017,...Ch. 14 - Prob. 14.6BECh. 14 - Prob. 14.7BECh. 14 - Prob. 14.8BECh. 14 - Prob. 14.9BECh. 14 - Prob. 14.10BECh. 14 - The following data are taken from the financial...Ch. 14 - Prob. 14.12BECh. 14 - Prob. 14.13BECh. 14 - Prob. 14.14BECh. 14 - On June 30. Holloway Corporation discontinued its...Ch. 14 - Prob. 14.1DICh. 14 - Prob. 14.2DICh. 14 - In its proposed 2017 income statement. Hrabik...Ch. 14 - Financial information for Kurzen Inc. is presented...Ch. 14 - Operating data for Navarro Corporation are...Ch. 14 - The comparative condensed balance sheets of Gurley...Ch. 14 - The comparative condensed income statements of...Ch. 14 - Suppose Nordstrom, Inc., which operates department...Ch. 14 - Keener Incorporated had the following transactions...Ch. 14 - Frizell Company has the following comparative...Ch. 14 - Prob. 14.8ECh. 14 - Prob. 14.9ECh. 14 - Prob. 14.10ECh. 14 - Wiemers Corporations comparative balance sheets...Ch. 14 - Prob. 14.12ECh. 14 - Prob. 14.13ECh. 14 - Comparative statement data for Farris Company and...Ch. 14 - The comparative statements of Painter Tool Company...Ch. 14 - Prob. 14.3APCh. 14 - Financial information for Messersmith Company is...Ch. 14 - Prob. 14.5APCh. 14 - Prob. 14.6APCh. 14 - Prob. 14.7APCh. 14 - Prob. 14.8APCh. 14 - Prob. 14.9APCh. 14 - Financial Reporting Problem: Apple Inc. Your...Ch. 14 - PepsiCos financial statements are presented at...Ch. 14 - Prob. 14.3BYPCh. 14 - As the CPA for Gandara Manufacturing Inc., you...Ch. 14 - The Management Discussion and Analysis section of...Ch. 14 - Prob. 14.6BYPCh. 14 - Dave Schonhardt, president of Schonhardt...
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