Financial and Managerial Accounting - With CengageNow
14th Edition
ISBN: 9781337577809
Author: WARREN
Publisher: CENGAGE L
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Textbook Question
Chapter 4, Problem 4ADM
Google and Microsoft:
Google, Inc. and Microsoft Corporation design and distribute consumer and enterprise software, including overlaps in search, business productivity, and mobile operating systems. Google’s primary source of revenue is from advertising, while Microsoft’s is from software subscription and support fees. The following year-end data (in millions) were taken from recent balance sheets for both companies:
| Microsoft | ||||
| Year 2 | Year 1 | Year 2 | Year 1 | |
| Current assets | $114,246 | $101,466 | $72,886 | $80,685 |
| Current liabilities | 45,625 | 37,417 | 15,908 | 16,805 |
A. Compute the
B. Which company has the larger working capital at the end of Year 2?
C. Is working capital a good measure of relative liquidity in comparing the two companies? Explain.
D. Compute the current ratio for both companies. (Round to one decimal place.)
E. Which company has the larger relative liquidity based on the current ratio?
F. Based on your analysis, comment on the short-term debt-paying ability of these two companies.
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Students have asked these similar questions
Selected income statement data for Abbott Laboratories, Bristol-Myers Squibb Company, Johnson & Johnson, GlaxoSmithKline plc, and Pfizer, Inc. is presented in the following table:
Bristol- Johnson
Glaxo
Abbott
Мyers
&
Smith
($ millions)
Laboratories Squibb Johnson Kline plc Pfizer
Sales revenue
$38,851 $21,244 $65,030
£27,387 $67,425
Cost of sales
15,541
5,598
20,360
7,332
15,085
SG&A expense
12,757
5,160
20,969
8,826 19,468
R&D expense
4,129
3,839
7,548
4,009
9,112
Interest expense
530
145
571
799
1,681
Net income
4,728
5,260
9,672
5,458
10,051
Required
a. Compute the profit margin (PM) and gross profit margin (GPM) ratios for each company. (As a British company, GlaxoSmithKline plc has a statutory tax rate of 26.5% in 2014; assume a
statutory rate of 35% for all other companies.)
(Round your answers to one decimal place.)
Bristol-
Johnson
Glaxo
Abbott
Myers
&
Smith
Laboratories
Squibb
Johnson
Kline plc
Pfizer
PM
%
GPM
%
b. Compute the research and development (R&D) expense to sales…
Vertical analysis
Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through income from operations for two recent years are as follows (in millions):
Amazon.com, Inc.
Operating Income Statements
For the Years Ended December 31
(in millions)
Year 2
Year 1
Product sales
$70,080
$60,903
Service sales
18,908
13,549
Total sales
$88,988
$74,452
Cost of sales
$62,752
$54,181
Fulfillment
10,766
8,585
Marketing
4,332
3,133
Technology and content
9,275
6,565
General and administrative
1,552
1,129
Other operating expense (income), net
133
114
Total operating expenses
$88,810
$73,707
Income from operations
$178
$745
Required:
a. Prepare a vertical analysis of the two operating income statements. Round percentages to one decimal place.
Vertical analysis
Amazon.com, Inc. is the largest Internet retailer in the United States. Amazon’s income statements through income from operations for two recent years are as follows (in millions):
Amazon.com, Inc.
Operating Income Statements
For the Years Ended December 31
(in millions)
Year 2
Year 1
Product sales
$70,080
$60,903
Service sales
18,908
13,549
Total sales
$88,988
$74,452
Cost of sales
$62,752
$54,181
Fulfillment
10,766
8,585
Marketing
4,332
3,133
Technology and content
9,275
6,565
General and administrative
1,552
1,129
Other operating expense (income), net
133
114
Total operating expenses
$88,810
$73,707
Income from operations
$178
$745
Required:
a. Prepare a vertical analysis of the two operating income statements. Round percentages to one decimal place.
Amazon.com, Inc.
Operating Income Statements
For the Years Ended December 31 (in millions)
Year 2
Year 1
Amount
Percent
Amount
Percent
Product sales…
Chapter 4 Solutions
Financial and Managerial Accounting - With CengageNow
Ch. 4 - Why do some accountants prepare an end-of-period...Ch. 4 - Describe the nature of the assets that compose the...Ch. 4 - Prob. 3DQCh. 4 - What types of accounts are referred to as...Ch. 4 - Why are closing entries required at the end of an...Ch. 4 - Prob. 6DQCh. 4 - What is the purpose of the post-closing trial...Ch. 4 - Prob. 8DQCh. 4 - Prob. 9DQCh. 4 - Recent fiscal years for several well-known...
Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Retained earnings statement Blake Knudson owns and...Ch. 4 - Classified balance sheet The following accounts...Ch. 4 - Closing entries After the accounts have been...Ch. 4 - Accounting cycle From the following list of steps...Ch. 4 - Flow of accounts into financial statements The...Ch. 4 - Classifying accounts Balances for each of the...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Financial statements from the end-of-period...Ch. 4 - Income statement The following account balances...Ch. 4 - Income statement; net loss The following revenue...Ch. 4 - Income statement FedEx Corporation had the...Ch. 4 - Retained earnings statement Climate Control...Ch. 4 - Retained earnings statement; net loss Selected...Ch. 4 - Classifying assets Identify each of the following...Ch. 4 - Balance sheet classification At the balance sheet...Ch. 4 - Balance sheet Dynamic Weight Loss Co. offers...Ch. 4 - Balance sheet List the errors you find in the...Ch. 4 - Prob. 4.14EXCh. 4 - Closing entries Prior to its closing, Income...Ch. 4 - Closing entries with net income After all revenue...Ch. 4 - Prob. 4.17EXCh. 4 - Identifying permanent accounts Which of the...Ch. 4 - Post-closing trial balance An accountant prepared...Ch. 4 - Steps in the accounting cycle Rearrange the...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Appendix 1 Adjustment data on an end-of-period...Ch. 4 - Appendix 1 Completing an end-of-period spreadsheet...Ch. 4 - Prob. 4.24EXCh. 4 - Prob. 4.25EXCh. 4 - Appendix 1 Closing entries from an end-of-period...Ch. 4 - Appendix 2 Reversing entry The following adjusting...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Adjusting and reversing entries On the...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Appendix 2 Entries posted to wages expense account...Ch. 4 - Financial statements and closing entries Lamp...Ch. 4 - Financial statements and closing entries Foxy...Ch. 4 - Prob. 4.3APRCh. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - Financial statements and closing entries Last...Ch. 4 - Financial statements and closing entries The...Ch. 4 - Prob. 4.3BPRCh. 4 - Ledger accounts, adjusting entries, financial...Ch. 4 - Complete accounting cycle For the past several...Ch. 4 - The unadjusted trial balance of PS Music as of...Ch. 4 - Kelly Pitney began her consulting business, Kelly...Ch. 4 - Continuing Company Analysis- Amazon: Working...Ch. 4 - Under Armour: Current ratio The following year-end...Ch. 4 - Prob. 3ADMCh. 4 - Google and Microsoft: Current ratio Google, Inc....Ch. 4 - Ethics in Action New Wave Images is a graphics...Ch. 4 - Prob. 4.3TIF
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