Concept explainers
1.
Compute the recent two year’s cash flow on total assets ratio for Company SE, Company A and Incorporation G.
1.
Explanation of Solution
Cash flow to total assets ratio: Cash flow to total assets ratio is used to measure the actual
Compute the cash flow on total assets ratio for Company SE:
Current year:
Thus, the cash flow on total assets ratio for the current year of Company SE is 22.0%.
Prior year:
Thus, the cash flow on total assets ratio for the prior year of Company SE is 18.8%.
Compute the cash flow on total assets ratio for Company A:
Current year:
Thus, the cash flow on total assets ratio for the current year of Company A is 18.2%.
Prior year:
Thus, the cash flow on total assets ratio for the prior year of Company A is 21.5%.
Compute the cash flow on total assets ratio for Incorporation G:
Current year:
Thus, the cash flow on total assets ratio for the current year of Incorporation G is 20.3%.
Prior year:
Thus, the cash flow on total assets ratio for the prior year of Incorporation G is 22.9%.
2.
Identify whether the change in cash flow on total assets ratio is favorable or unfavorable.
2.
Explanation of Solution
Cash flow to total assets ratio: Cash flow to total assets ratio is used to measure the actual cash inflows with respect to the assets of the company without being affected by income recognitions and measurements.
Company SE’s cash flow on total assets ratio during the current year is 22.0% and this indicates that the Company SE is having favorable cash flow on total assets ratio.
3.
Identify whether Company SE’s cash flow on total assets ratio is better or worse than Company A and Incorporation G.
3.
Explanation of Solution
Cash flow to total assets ratio: Cash flow to total assets ratio is used to measure the actual cash inflows with respect to the assets of the company without being affected by income recognitions and measurements.
- The cash flow on total assets ratio of Company A during the current year is 18.2% and for Company SE is 22.0%. This indicates that Company SE is better than Company A.
- The cash flow on total assets ratio of Incorporation G during the current year is 20.3% and for Company SE is 22.0%. This indicates that Company SE is better than Incorporation G.
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Chapter 16 Solutions
Principles of Financial Accounting.
- Please interpret the numbers and compare the number, no required to explain the theory. Also answer if the business is a going concern? CKM RATIOS: 2016 2017 2018 2019 2020 2021 Current ratio 0.66 0.58 0.96 0.92 1.06 0.83 Quick ratio 0.43 0.37 0.58 0.53 0.49 0.57 Operating cash flow ratio 0.10 0.01 0.01 0.00 0.02 0.07 PWC RATIOS: 2016 $000 2017 $000 2018 $000 2019 $000 2020 $000 2021 $000 Current ratio 2.37 2.23 2.07 1.89 2.74 2.16 Quick ratio 0.93 0.95 0.81 0.80 1.36 1.01 Operating cash flow ratio 1.02 0.72 0.96 0.47 0.32 0.52arrow_forwardPlease give a detailed analysis of the financial statements given below for Joshua & White Technologies. Your analysis should include answers to the questions as follows (not limited to these questions): Has the company’s liquidity position improved or worsened? Has the company’s ability to manage its assets improved or worsened? How has the company’s profitability changed during the last year? Joshua & White Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2019 2018 Cash and cash equivalents $21,000 $20,000 Short-term investments 3,759 3,240 Accounts Receivable 52,500 48,000 Inventories 84,000 56,000 Total current assets $161,259 $127,240 Net fixed assets 223,097 200,000 Total assets $384,356 $327,240 Liabilities and equity Accounts payable $33,600 $32,000 Accruals 12,600 12,000…arrow_forward(A) Explain how Unilever Pakistan, Inc. achieved positive cash flows from operating activities despite incurring a net loss for the year. (B) Does the company's financial position appear to be improving or deteriorating? Explain.arrow_forward
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- Refer to the above company’s financial statements. Calculate the current and quick ratios. Has the company’s liquidity position improved or worsened? Explain. A computer manufacturer has financial statements as follows: Income Statements for Year Ending December 31 (Thousands of Dollars) 2019 2018 Sales $945,000 $900,000 Expenses excluding depreciation and amortization 812,700 774,000 EBITDA $132,300 $126,000 Depreciation and amortization 33,100 31,500 EBIT $99,200 $94,500 Interest Expense 10,470 8,600 EBT $88,730 $85,900 Taxes (25%) 22,183 21,475 Net income $66,547 $64,425 Common dividends $56,609 $54,115 Addition to retained earnings $9,938 $10,310 Balance Sheets for Year Ending December 31 (Thousands of Dollars) Assets 2019 2018 Cash and cash equivalents…arrow_forwardRefer to the financial statements and related disclosure notes of The Kroger Company for the fiscal year endingJanuary 30, 2016. You can locate the report online from “investor relations” at www.kroger.com.Notice that Kroger’s net income has increased over the three years reported. To supplement their analysis ofprofitability, many analysts like to look at “free cash flow.” A popular way to measure this metric is “structuralfree cash flow” (or as Warren Buffett calls it, “owner’s earnings”), which is calculated as net income from operations, plus depreciation and amortization, minus capital expenditures.Required:Determine free cash flows for Kroger in each of the three years reported. Compare that amount with net incomeeach year. What pattern do you detect?arrow_forward1. Calculate the following values for the company for the year ending in 20x9. Present evidence of all your calculations.a. NOPAT - Net Operating Profit after Taxesb. OCF - Operating Cash Flowc. FCF - Free Cash Flow2. Discuss what meaning each of the measures calculated in the previous question has, both for management and for investors and creditors, among other constituents.3. What is the main cause of the differences that exist between the company's earnings and the cash flows of the same evaluated period?arrow_forward
- If a company paid $38,000 of its accounts payable in cash, what was the effect on the assets, liabilities, and equity? A. B. C. D. Group of answer choices Assets would decrease $38,000, liabilities would decrease $38,000, and equity would not change. There would be no effect on the accounts because the accounts are affected by the same amount. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would increase $38,000. Assets would decrease $38,000, liabilities would decrease $38,000, and equity would decrease $38,000.arrow_forwardIn December 2018, Apple had cash of $86.77 billion, current assets of $140.69 billion, and current liabilities of $108.31 billion. It also had inventories of $4.99 billion. a. What was Apple's current ratio? b. What was Apple's quick ratio? c. In January 2019, Hewlett-Packard had a quick ratio of 0.55 and a current ratio of 0.78. What can you say about the asset liquidity of Apple relative to Hewlett-Packard? a. What was Apple's current ratio? Apple's current ratio was _____. (Round to two decimal places.)arrow_forward1. The income statement provides investors and creditors information that helps them predict * d. All of these answers are correct. a. the amounts of future cash flows. c. the uncertainty of future cash flows. b. the timing of future cash flows. 2. For Mortenson Company, the following information is available: Cost of goods sold ₤240,000 Sales discounts 8,000 Income tax expense 24,000 Operating expenses 92,000 Sales revenue 400,000. In Mortenson’s income statement, the gross profit is * b. should be reported at ₤36,000. a. should not be reported. c. should be reported at ₤152,000. d. should be reported at ₤160,000. 3. Which of the following does not appear on a statement of retained earnings? c. Preference share dividends. a. Net loss. b. Prior period adjustments. d. Other comprehensive income. 4. Which of the following would appear first in a statement of retained earnings? b. Prior period adjustment. d. Share dividends. c. Cash dividends. a. Net income. 5. Which of…arrow_forward
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