FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
19th Edition
ISBN: 9781119493624
Author: Kimmel
Publisher: WILEY
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Chapter 2, Problem 2.3EYCT
(a)
To determine
Formula of working capital:
Formula of current ratio:
Debt to assets ratio: This financial ratio evaluates the ability of a company to pay off long-term debt obligations owed to creditors. This ratio assesses the solvency of a company.
Formula of debt to assets ratio:
Formula of free cash flow:
To compute: (1) Working capital, (2) Current ratio (3) Debt to assets ratio, (4) Free cash flow of Incorporation A and Incorporation W for 2014
(b)
To determine
To analyze: The liquidity and solvency position of two companies based on the computed ratios
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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.
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Alex is currently considering to invest his money in one of the companies betweenCompany A and Company B. The summarized final accounts of the companies for theirlast completed financial year are as follows: (refer to the images)
Required:a. Calculate the following ratios for Company A and Company B. State clearly theformulae used for each ratio:i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days)v. Payables Payment Period (days)vi. Current Ratiovii. Quick Ratiob. Comment on each of the ratios calculated in part (a) above.
Chapter 2 Solutions
FINANCIAL ACCOUNTING:TOOLS FOR BUSINESS
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