CengageNOWv2, 1 term Printed Access Card for Warren's Survey of Accounting, 8th
8th Edition
ISBN: 9781305961982
Author: Carl Warren
Publisher: Cengage Learning
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Chapter 3, Problem 3.7.3MBA
To determine
Concept Introduction:
Acid test ratio or Quick Ratio:
Acid test ration is also called Quick ratio. This ratio is calculated by dividing the quick assets (Cash, Cash equivalents, Short term investments and current receivables) by total current liabilities for the year. The formula for Acid test ratio is as follows:
To Indicate:
The Change in liquidity from year 2 to 1
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Ralph Lauren Corporation sells apparel through company-owned retail stores. Recent financial information for Ralph Lauren follows (in thousands):
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Assume that the apparel industry average return on total assets is 8.0% and the average return on stockholders’ equity is 10.0% for the year ended April 2, Year 3.a. Determine the return on total assets for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.b. Determine the return on stockholders’ equity for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.c. Evaluate the two-year trend for the profitability ratios determined in (a) and (b).d. Evaluate Ralph Lauren’s profit performance relative to the industry.
Chapter 3 Solutions
CengageNOWv2, 1 term Printed Access Card for Warren's Survey of Accounting, 8th
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- Lowes Companies Inc., a major competitor of The Home Depot in the home improvement business, operates over 1,700 stores. Lowes recently reported the following balance sheet data (in millions): a. Determine the total stockholders equity at the end of Years 2 and 1. b. Determine the ratio of liabilities to stockholders equity for Year 2 and Year 1. Round to two decimal places. c. What conclusions regarding the risk to the creditors can you draw from (b)? d. Using the balance sheet data for The Home Depot in Exercise 1-26, how does the ratio of liabilities to stockholders equity of Lowes compare to that of The Home Depot?arrow_forwardRalph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The companys products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years: Assume that accounts receivable (in millions) were 607,000 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to two decimal places. b. Compute the days sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. c. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?arrow_forwardFitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie Fitch for fiscal years ending January 31, Year 3, Year 4, and Year 5 appear in Exhibit 4.34 (balance sheets), Exhibit 4.35 (income statements), and Exhibit 4.36 (statements of cash flows). These financial statements reflect the capitalization of operating leases in property, plant, and equipment and long-term debt, a topic discussed in Chapter 6. Exhibit 4.37 (page 312) presents financial statement ratios for Abercrombie Fitch for Years 3 and 4. Selected data for Abercrombie Fitch appear here. Exhibit 4.34 REQUIRED a. Calculate the ratios in Exhibit 4.37 for Year 5. The income tax rate is 35%. b. Analyze the changes in ROA for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. c. Analyze the changes in ROCE for Abercrombie Fitch during the three-year period, suggesting possible reasons for the changes observed. Exhibit 4.35 Exhibit 4.36 Exhibit 4.37arrow_forward
- Polo Ralph Lauren Corporation designs, markets, and distributes a variety of apparel, home decor, accessory, and fragrance products. The companys products include such brands as Polo by Ralph Lauren, Ralph Lauren Purple Label, Ralph Lauren, Polo Jeans Co., and Chaps. Polo Ralph Lauren reported the following (in thousands) for two recent years: Assume that accounts receivable (in millions) were 486,200 at the beginning of Year 1. a. Compute the accounts receivable turnover for Year 2 and Year 1. Round to one decimal place. b. Compute the days sales in receivables for Year 2 and Year 1. Use 365 days and round to one decimal place. c. What conclusions can be drawn from these analyses regarding Ralph Laurens efficiency in collecting receivables?arrow_forwardAnalyze and compare Kroger and Tiffany The Kroger Company (KR), a national supermarket chain, reported the following data (in millions) in its financial statements for a recent year: a.Compute the asset turnover ratio. Round to two decimal places. b.Tiffany Co. (TIF) is a large North American retailer of jewelry. Tiffanys asset turnover ratio is 0.78. Why would Tiffanys asset turnover ratio be lower than that of Kroger?arrow_forwardAnalyze Lowes for three years Lowes Companies, Inc. (LOW), a major competitor to The Home Depot, Inc. (HD) in the home improvement retail business, operates over 1,800 stores. Lowes recently reported the following end-of-year balance sheet data (in millions): a. Compute the ratio of liabilities to stockholders equity for all three years. Round to two decimal places. b. What conclusions regarding the margin of protection to creditors can you draw from the trend in this ratio for the three years?arrow_forward
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