Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)
15th Edition
ISBN: 9780134478166
Author: Chad J. Zutter, Scott B. Smart
Publisher: PEARSON
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Chapter 3, Problem 3.2STP
Summary Introduction

To discuss:

Balance sheet completion using ratios.

Introduction:

The balance sheet reveals the financial health of company by depicting the summary of available assets (both owner’s equity and outsider’s equity) from investing and owed liabilities of the firm from its financial activities at a given point of time.

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(Learning Objective 7: Calculate return on assets) Hometown Supply Companyreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$84,000$ 4,200$70,000$82,600$ 4,050$69,450Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?
(Learning Objective 2: Calculate days’ payable outstanding) The balance of LandyCorporation’s accounts payable at the beginning of the most recent year was $50,000. At theend of the year, the accounts payable balance was $54,000. Landy’s sales revenue for the yearwas $3,105,000, while its cost of goods sold for the year was $1,508,000. Calculate Landy’sdays’ payable outstanding (DPO) for the year. Assume inventory levels are constant throughoutthe year. If the credit terms from Landy’s suppliers are n/30, how would you interpret Landy’sDPO?
(Learning Objective 2: Analyze accounts payable turnover) Barnacle Sales, Inc.’s,comparative income statements and balance sheets show the following selected information for2017 and 2018:2018$2,850,000$ 800,000$ 600,000$ 305,0002017$2,700,000$ 600,000$ 400,000$ 255,000Cost of goods sold.......................................................Ending inventory.........................................................Beginning inventory ....................................................Average accounts payable ...........................................Requirements1. Calculate the company’s accounts payable turnover and days’ payable outstanding (DPO)for 2017 and 2018.2. On the basis of this computation alone, has the company’s liquidity position improved ordeteriorated during 2018?

Chapter 3 Solutions

Principles of Managerial Finance, Student Value Edition (15th Edition) (The Pearson Series in Finance)

Ch. 3.4 - To assess the firms average collection period and...Ch. 3.5 - What is financial leverage?Ch. 3.5 - What ratio measures the firms degree of...Ch. 3.6 - What three ratios of profitability appear on a...Ch. 3.6 - Prob. 3.15RQCh. 3.6 - Prob. 3.16RQCh. 3.7 - What do the price/earnings (P/E) ratio and the...Ch. 3.8 - Financial ratio analysis is often divided into...Ch. 3.8 - Prob. 3.19RQCh. 3.8 - What three areas of analysis are combined in the...Ch. 3 - For the quarter ended January 28, 2017, Kroger...Ch. 3 - Learning Goals 3, 4, 5 ST3-1 Ratio formulas and...Ch. 3 - Prob. 3.2STPCh. 3 - Prob. 3.1WUECh. 3 - Learning Goal 1 E3-2 Explain why the income...Ch. 3 - Prob. 3.3WUECh. 3 - Learning Goal 3 E3-4 Bluestone Metals Inc. is a...Ch. 3 - Learning Goal 6 E3-5 If we know that a firm has a...Ch. 3 - Financial statement account identification Mark...Ch. 3 - Learning Goal 1 P3-2 1ncome statement preparation...Ch. 3 - Prob. 3.3PCh. 3 - Learning Goal 1 P3-4 Calculation of EPS and...Ch. 3 - Prob. 3.5PCh. 3 - Prob. 3.6PCh. 3 - Learning Goals 1 P3-7 Initial sale price of common...Ch. 3 - Prob. 3.8PCh. 3 - Learning Goal 1 P3-9 Changes In stockholders...Ch. 3 - Learning Goals 2, 3, 4, 5 P3-10 Ratio comparisons...Ch. 3 - Learning Goal 3 P3-11 Liquidity management Bauman...Ch. 3 - Prob. 3.12PCh. 3 - Inventory management Three companies that compete...Ch. 3 - Accounts receivable management The table below...Ch. 3 - Prob. 3.15PCh. 3 - Learning Goal 4 P3-16 Debt analysis Springfield...Ch. 3 - Prob. 3.17PCh. 3 - Learning Goals 2, 3, 4 P3-18 Using Tables 3.1,...Ch. 3 - Learning Goals 5 P3-19 Common-size statement...Ch. 3 - The relationship between financial leverage and...Ch. 3 - Learning Goal 4 P3-21 Analysis of debt ratios...Ch. 3 - Learning Goal 6 P3-22 Ratio proficiency McDougal...Ch. 3 - Learning Goal 6 P3-23 Cross-sectional ratio...Ch. 3 - Learning Goal 6 P3-24 Financial statement analysis...Ch. 3 - Learning Goals 6 P3- 25 Integrative: Complete...Ch. 3 - Learning Goal 6 P3-26 DuPont system of analysis...Ch. 3 - Learning Goal 6 P3-27 Complete ratio analysis,...Ch. 3 - Spreadsheet Exercise The income statement and...
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Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License