(a)
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 analyze: The liquidity and solvency position of two companies based on the computed ratios
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Chapter 2 Solutions
FINANCIAL ACCOUNTING: TOOLS FOR BUSINES
- The comparative balance sheet of Cromme Inc. for December 31, 2016 and 2015, is shown as follows: Additional data obtained from an examination of the accounts in the ledger for 2016 are as follows:a. The investments were sold for $280,000 cash.b. Equipment and land were acquired for cash.c. There were no disposals of equipment during the year.d. The common stock was issued for cash.e. There was a $199,540 credit to Retained Earnings for net income.f. There was a $96,000 debit to Retained Earnings for cash dividends declared.InstructionsPrepare a statement of cash flows, using the indirect method of presenting cash flows from operating activities.arrow_forwardThe below tables shows Dynamic Mattress’s year-end 2016 and 2018 balance sheets, and its income statement for 2017. Dynamic MattressYear-End Balance Sheet for 2016(figures in $ millions) Assets Liabilities and Shareholders’ Equity Current Assets: Current Liabilities: Cash $ 22 Bank loans $ 22 Marketable securities 11 Accounts payable 80 Accounts receivable 111 Inventory 155 Total current assets $ 299 Total current liabilities $ 102 Fixed assets: Gross investment $ 251 Long-term debt 26 Less depreciation 71 Net worth (equity and retained earnings) 351 Net fixed assets $ 180 Total assets $ 479 Total liabilities and net worth $ 479 Dynamic MattressYear-End Balance Sheet for 2017(figures in $ millions) Assets Liabilities and Shareholders’ Equity Current Assets: Current Liabilities: Cash $ 32.0 Debt due within a year (bank…arrow_forwardThe below tables shows Dynamic Mattress’s year-end 2016 and 2018 balance sheets, and its income statement for 2017. Dynamic MattressYear-End Balance Sheet for 2016(figures in $ millions) Assets Liabilities and Shareholders’ Equity Current Assets: Current Liabilities: Cash $ 46 Bank loans $ 46 Marketable securities 23 Accounts payable 140 Accounts receivable 123 Inventory 215 Total current assets $ 407 Total current liabilities $ 186 Fixed assets: Gross investment $ 263 Long-term debt 38 Less depreciation 83 Net worth (equity and retained earnings) 363 Net fixed assets $ 180 Total assets $ 587 Total liabilities and net worth $ 587 Dynamic MattressYear-End Balance Sheet for 2017(figures in $ millions) Assets Liabilities and Shareholders’ Equity Current Assets: Current Liabilities: Cash $ 176.0 Debt due within a year (bank…arrow_forward
- Flynn Plastics Company reports the following data in its September 30, 2015, financial statements: Gross sales $225 000 Current assets $50 000 Long-term assets $130 000 Current liabilities $33 000 Long-term liabilities $52 000 Net income $11 250 (a) Compute the owners’ equity. (b) Compute the current ratio. (c) Compute the debt-to-equity ratio.arrow_forwardAnalysts following the Tomkovick Golf Company were given the following balance sheet information for the years ended June 30, 2011 and June 30, 2010: Assets 2011 2010 Cash and marketable securities $33,411 $16,566 Accounts receivable 303,585 318,768 Inventory 380,439 352,740 Other current assets 41,251 29,912 Total current assets $758,686 $717,986 Plant and equipment 2,013,377 1,609,898 Less: Accumulated depreciation (500,702) (206,678) Net plant and equipment $1,512,675 $1,403,220 Goodwill and other assets 382,145 412,565 Total assets $2,653,506 $2,533,771 Liabilities and Stockholders' Equity 2011 2010 Accounts payable and accruals $378,236 $332,004 Notes payable 14,487 7,862 Accrued income taxes 21,125 16,815 Total current liabilities $413,848 $356,681 Long-term debt 709,044 793,515 Total liabilities $1,122,892…arrow_forwardThe comparative balance sheets for 2024 and 2023 and the statement of income for 2024 are given below for Dux Company. Additional information from Dux's accounting records is provided also. DUX COMPANY Comparative Balance Sheets December 31, 2024 and 2023 ($ in thousands) 2024 2023 Assets Cash $ 121 $ 40 Accounts receivable 43 71 Less: Allowance for uncollectible accounts (5) (4) Dividends receivable 4 3 Inventory 100 95 Long-term investment 54 50 Land 95 85 Buildings and equipment 162 200 Less: Accumulated depreciation (38) (80) $ 536 $ 460 Liabilities Accounts payable $ 46 $ 82 Salaries payable 6 9 Interest payable 7 2 Income tax payable 5 6 Notes payable 10 0 Bonds payable 80 50 Less: Discount on bonds (5) (6) Shareholders' Equity Common stock 210 200 Paid-in capital—excess of par 24 20 Retained earnings 163 97 Less: Treasury stock (10) 0 $ 536 $ 460 DUX COMPANY Income Statement For the Year…arrow_forward
- The financial statements for Tyler Toys, Inc. are shown in the popup window: LOADING... . Calculate the profit margin, return on assets, and return on equity for 2013 and 2014 for Tyler Toys. Should any of these ratios or the change in a ratio warrant concern for the managers of Tyler Toys or the shareholders? Tyler Toys, Inc. Income Statement for Years Ending December 31, 2013 and 2014 2014 2013 Revenue $14,146,094 $13,567,551 Cost of goods sold $-8,448,688 $-8,131,338 Selling, general, and administrative expenses $-998,878 $-980,620 Depreciation $-1,497,580 $-1,472,740 EBIT $3,200,948 $2,982,853 Interest expense $-376,634 $-354,060 Taxes $-1,073,239 $-998,941 Net income $1,751,075 $1,629,852 Right-click on the table and select Copy to Clipboard and then right-click the highlighted texts in the popup dialogue box and select Copy in order to paste its…arrow_forwardUsing the Balance Sheets and Income Statement below, please calculate the following ratios for Smolira Golf Corp. (use year-end figures rather than average values where appropriate): Profitability ratios: Profit Margin Return on Assets Return on Equity We will follow up and discuss your calculations during this week's live session. SMOLIRA GOLD CORP.2014 and 2015 Balance Sheets Assets ($) Liabilities and Owners' Equity ($) 2014 2015 2014 2015 Current Assets Current Liabilities Cash 26,450 29,106 Accounts Payable 30,602 35,485 Accounts Receivable 13,693 18,282 Notes Payable 15,840 13,500 Inventory 27,931 32,586 Other 15,280 20,441 Total 68,074 79,974 Total 61,722 69,426 Long-term debt 95,000 110,000 Fixed Assets Owner's equity Net Plant and Equipment 357,165 398,346 Common stock and paid-in surplus 45,000 45,000…arrow_forwardEach of the following items is shown in the financial statements of Exxon Mobil Corporation:1. Accounts payable2. Cash equivalents3. Crude oil inventory4. Equipment5. Exploration expenses6. Income taxes payable7. Investments8. Long-term debt9. Marketable securities10. Notes and loans payable11. Notes receivable12. Operating expenses13. Prepaid taxes14. Sales15. Selling expensesa. Identify the financial statement (balance sheet or income statement) in which each item would appear.b. Can an item appear on more than one financial statement?c. Is the accounting equation relevant for Exxon Mobil Corporation?arrow_forward
- Below is the balance sheet and income statement for Chin Corporation. You are needed to analyze the financial statements. Use the horizontal, vertical, ratio methods to analyze the financial statements. For the vertical and horizontal analysis, type the accounts and dollar values for the years 2018 and 2017 (as listed on the financial statements even if there is no dollar value for an account). For the ratio analysis, make sure to compute 2 ratios from each section. Income Statement Period Ending: 12/31/2018 12/31/2017 Total Revenue $76,512,000 $78,291,000 Cost of Revenue $54,884,000 $56,586,000 Gross Profit $21,628,000 $21,706,000 Operating Expenses Research and Development $0 $0 Sales, General, and Admin. $13,886,000 $13,599,000 Non-Recurring Items $0 $0 Other Operating Items $0 $0 Operating Income $7,832,000 $8,079,000 Add'l income/expense items -$323,000…arrow_forwardThe accounting information collected from the MCM company is detailed in the attached tables. Prepare the following: Calculate the following financial ratios: Current ratio, acid test ratio, participation ratio, profit margin. Financial information was collected for the month of September 210 for the company MCM. Balance Bills to pay $35000 receivable accounts $29000 bonds payable $110000 buildings (net value) $605000 cash on hand $17000 dividends payable $8000 inventary $31000 terrain $450000 long-term mortgage payable $450000 retained earnings $154000 stock values $375000 transaction in september 2010 category Amount workforce $50000 bills insurance $20000 sales $62000 rent and maintenance $40000 salary $110000 others $62000 total $294000 income taxes $20000 finished goods inventory as of September 1, 2010 $25000 finished goods inventory as of September 30, 2010 $50000 materials inventory…arrow_forwardDuring 2022, Pronghorn Corp entered into the following transactions. 1. Borrowed $62,200 by issuing bonds. 2. Paid $8,890 cash dividend to stockholders. 3. Received $13,900 cash from a previously billed customer for services performed. 4. Purchased supplies on account for $5,000. Using the following tabular analysis, show the effect of each transaction on the accounting equation. (If a transaction causes a decrease in Assets, Liabilities or Stockholders' Equity, place a negative sign (or parentheses) in front of the amount entered for the particular Asset, Liability or Equity item that was reduced. See Illustration 3-4 for example.) Assets = Liabilities + Stockholders’ Equity Cash + Accounts Receivable + Supplies = Accounts Payable + Bonds Payable + Common Stock + Retained EarningsDividends (1) $enter a dollar amount $enter a dollar amount $enter a dollar amount $enter a dollar amount $enter a dollar amount…arrow_forward
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781337272124Author:Carl Warren, James M. Reeve, Jonathan DuchacPublisher:Cengage LearningFinancial AccountingAccountingISBN:9781305088436Author:Carl Warren, Jim Reeve, Jonathan DuchacPublisher:Cengage Learning