Requirement 1:
Determine the return on common equity ratio of Company H for 2013.
Requirement 1:
Explanation of Solution
Determine the return on common equity ratio of Company H for 2013.
Step 1: Calculate the average total common
Step 2: Calculate the return on common equity ratio of C&C Incorporation for 2013.
Hence, the return on common equity ratio of Company H for 2013 is 0.616.
Comment:
Return on common equity ratio indicates that Company H generated a 61.6% return for its common shareholders.
Requirement 2:
Determine the debt-to-assets ratio of Company H for 2013.
Requirement 2:
Explanation of Solution
Determine the debt-to-assets ratio of Company H for 2013.
Hence, the debt-to-assets ratio of Company H for 2013 is 0.698.
Comment:
Debt-to-assets ratio indicates that Company H’s 69.8% of total assets are financed by its creditors.
Requirement 3:
Determine the debt-to-equity ratio of Company H for 2013.
Requirement 3:
Explanation of Solution
Determine the debt-to-equity ratio of Company H for 2013.
Hence, the debt-to- equity ratio of Company H for 2013 is 2.32.
Comment:
Debt-to-assets ratio indicates that Company H has $2.32 in total liabilities for every of $1.00 in equity.
Requirement 4:
Determine the
Requirement 4:
Explanation of Solution
Determine the current ratio of Company H for 2013.
Hence, the current ratio of Company H for 2013 is 1.77.
Comment:
Current ratio indicates that Company H has $1.77 in current assets for every of $1.00 in current liabilities.
Requirement 5:
Determine the quick ratio of Company H for 2013.
Requirement 5:
Explanation of Solution
Determine the quick ratio of Company H for 2013.
Hence, the quick ratio of Company H for 2013 is 1.13.
Comment:
Quick ratio indicates that Company H has $1.13 in quick assets (cash and receivables) for every of $1.00 in current liabilities.
Requirement 6:
Determine the inventory turnover in days of Company H for 2013.
Requirement 6:
Explanation of Solution
Determine the inventory turnover in days of Company H for 2013.
Step 1: Calculate the average inventory.
Step 2: Calculate the inventory turnover.
Step 3: Calculate the inventory turnover in days of C&C Incorporation for 2013.
Hence, the inventory turnover days of Company H for 2013 are 61 days.
Comment:
On an average Company H takes 61 days to convert inventory into sales in the operation cycle.
Requirement 7:
Determine the accounts receivable turnover in days of Company H for 2013.
Requirement 7:
Explanation of Solution
Determine the accounts receivable turnover in days of Company H for 2013.
Step 1: Calculate the average accounts receivable.
Step 2: Calculate the accounts receivable turnover.
Step 3: Calculate the accounts receivable turnover in days of C&C Incorporation for 2013.
Hence, the accounts receivable turnover days of Company H for 2013 are 24 days.
Comment:
On an average Company H takes 24 days to collect its receivables from its customers.
Requirement 8:
Determine the accounts payable turnover in days of Company H for 2013.
Requirement 8:
Explanation of Solution
Determine the accounts payable turnover in days of Company H for 2013.
Step 1: Determine the amount of inventory purchases.
Step 2: Calculate the average accounts payable.
Step 3: Calculate the accounts payable turnover.
Step 4: Determine the accounts payable turnover in days.
Hence, the accounts payable turnover in days of Company H for 2013 is 42 days.
Comment:
On an average Company H takes 42 days to pay its payables to its suppliers.
Requirement 9:
Determine the operating cycle in days of Company H for 2013.
Requirement 9:
Explanation of Solution
Determine the operating cycle in days of Company H for 2013.
Hence, the operating cycle in days of Company H for 2013 is 43 days.
Comment:
Company H takes 43days to complete an operating cycle (the purchase of inventory and collection of cash from accounts receivable).
Requirement 10:
Determine the total assets turnover ratio of Company H for 2013.
Requirement 10:
Explanation of Solution
Determine the total assets turnover ratio of Company H for 2013:
Step 1: Calculate average total assets.
Step 2: Calculate the total assets turnover ratio of C&C Incorporation for 2013.
Hence, the total assets turnover ratio of Company H for 2013 is 1.41.
Comment:
Total assets turnover ratio indicates that Company H has generated $1.41 in sales for every of $1.00 in assets.
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Chapter 4 Solutions
Cengagenowv2, 1 Term Printed Access Card For Wahlen/jones/pagach’s Intermediate Accounting: Reporting And Analysis, 2017 Update, 2nd
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- Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning