Financial Accounting: Information for Decisions
8th Edition
ISBN: 9781259533006
Author: John J Wild
Publisher: McGraw-Hill Education
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Question 2Alex is currently considering to invest his money in one of the companies between Company A and Company B. The summarized final accounts of the companies for their last completed financial year are as follows:
a. Calculate the following ratios for Company A and Company B. State clearly the formulae used for each ratio:
i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days)
b. The second step is to prepare a common-size income statement for the firm.
Complete the common-size income statement below: (Round to one decimal place.)
Common-Size Income Statement
2016
Revenues
$
29,970
%
Cost of goods sold
(20,030)
Gross profit
$
9,940
%
Operating expenses
(8,030)
Net operating income
$
1,910
%
Interest expense
(860)
Earnings before taxes
$
1,050
%
Income taxes
(382)
Net income
$
668
%
1. Assuming that sales revenue is increases by 10 percent, calculate the net income of DEF Company,
2. assuming that sales revenue is increases by 10 percent, find out the net income of ABC Company.
Chapter 9 Solutions
Financial Accounting: Information for Decisions
Ch. 9 - Prob. 1DQCh. 9 - Prob. 2DQCh. 9 - Prob. 3DQCh. 9 - Prob. 4DQCh. 9 - What is the combined amount (in percent) of the...Ch. 9 - What is the current Medicare tax rate? This rate...Ch. 9 - Prob. 7DQCh. 9 - Prob. 8DQCh. 9 - Prob. 9DQCh. 9 - Why are warranty liabilities usually recognized on...
Ch. 9 - Prob. 11DQCh. 9 - Prob. 12DQCh. 9 - Prob. 13DQCh. 9 - Prob. 14DQCh. 9 - Prob. 15DQCh. 9 - Prob. 16DQCh. 9 - Prob. 17DQCh. 9 - Prob. 1QSCh. 9 - Prob. 2QSCh. 9 - Ticketsales, Inc., receives $5,000,000 cash in...Ch. 9 - Prob. 4QSCh. 9 - Prob. 5QSCh. 9 - Prob. 6QSCh. 9 - Prob. 7QSCh. 9 - Prob. 8QSCh. 9 - Prob. 9QSCh. 9 - Prob. 10QSCh. 9 - Prob. 11QSCh. 9 - Prob. 12QSCh. 9 - Sera Corporation has made and recorded its...Ch. 9 - Prob. 1ECh. 9 - Prob. 2ECh. 9 - Prob. 3ECh. 9 - Interest-bearing notes payable with year-end...Ch. 9 - Prob. 5ECh. 9 - Prob. 6ECh. 9 - Prob. 7ECh. 9 - Prob. 8ECh. 9 - Prob. 9ECh. 9 - Hitzu Co. sold a copier costing $4,800 with a...Ch. 9 - Prob. 11ECh. 9 - Prob. 12ECh. 9 - Accounting for contingent liabilities C3 Prepare...Ch. 9 - Prob. 14ECh. 9 - Prob. 15ECh. 9 - Prob. 16ECh. 9 - Prob. 18ECh. 9 - Prob. 1PSACh. 9 - Prob. 2PSACh. 9 - Prob. 3PSACh. 9 - Prob. 4PSACh. 9 - Prob. 5PSACh. 9 - Entries for payroll transactions P2 P3 P5...Ch. 9 - Prob. 1PSBCh. 9 - Prob. 2PSBCh. 9 - Fishing Guides Co. has four employees. FICA Social...Ch. 9 - Prob. 4PSBCh. 9 - Shown here are condensed income statements for two...Ch. 9 - Prob. 6PSBCh. 9 - Prob. 9SPCh. 9 - Refer to the financial statements of Apple in...Ch. 9 - Key figures for Apple and Google follow. *Apple...Ch. 9 - Prob. 3BTNCh. 9 - Prob. 5BTNCh. 9 - Assume that your team is in business and you must...Ch. 9 - Prob. 7BTNCh. 9 - Prob. 8BTNCh. 9 - Prob. 9BTN
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- Comparing Two Companies in the Same Industry: Chipotle and Panera Bread Refer to the financial information for Chipotle and Panera Bread reproduced at the back of the book and answer the following questions. What was the total revenue for each company for the most recent year? By what percentage did each companys revenue increase or decrease from its total amount in the prior year? What was each companys net income for the most recent year? By what percentage did each companys net income increase or decrease from its net income for the prior year? What was the total asset balance for each company at the end of its most recent year? Among its assets, what was the largest asset each company reported on its year-end balance sheet? Did either company pay its stockholders any dividends during the most recent year? Explain how you can tell.arrow_forwardReturn on assets The following data (in millions) were adapted from recent financial statements of Tootsie Roll Industries Inc. (TR): The percent a company adds to its cost of sales to determine selling price is called a markup. What is Tootsie Roll’s markup percent? Round to one decimal place.arrow_forwardComparing Two Companies in the Same Industry: Chipotle and Panera Bread This case should be completed after responding to the requirements in Decision Case 13-2. Refer to the financial statement information of Chipotle and Panera Bread reprinted at the back of the book. Required Using the format in Example 13-5, prepare common-size comparative income statements for 2014 and 2013, for Panera Bread. Use total revenues as the base (i.e., 100%). Round all percentages to the nearest one-tenth of a percent. The common-size comparative income statements indicate the relative importance of items on the statement. Compare the common-size income statements of Panera Bread and Chipotle. What are the most important differences between the two companies income statements? Using the format in Example 13-4, prepare common-size comparative balance sheets at the end of 2014 and 2013, for Panera Bread. Round all percentages to the nearest one-tenth of a percent. The common-size comparative balance sheets indicate the relative importance of items on the statement. Compare the common-size balance sheets of Panera Bread and Chipotle. What are the most important differences between the two companies balance sheets?arrow_forward
- Multiple-Step Income Statement and Profit Margin Refer to the list of income statement items in Problem 2-6. Assume that Shaw Corporation classifies all operating expenses into two categories: (1) selling and (2) general and administrative. Required Prepare a multiple-step income statement for the current year. What advantages do you see in this form for the income statement? Compute Shaws profit margin. Comment on Shaws profitability. What other factors need to be taken into account to assess Shaws profitability?arrow_forwardReturn on assets The financial statements of The Hershey Company (HSY) are shown in Exhibits 6 through 9 of this chapter. Based upon these statements, answer the following questions. The percent that a company adds to its cost of sales to determine the selling price is called a markup. That is Hershey’s markup percent? Round to one decimal place.arrow_forwardMultiple-Step and Single-Step In coin Statements The following items were derived from Gold Companys December 31 adjusted trial balance: Additional data: 1. Screen thousand share of common stock have been outstanding the entire year. 2. The income tax rate is 30% on all items of income. Required: 1. Prepare a multiple-st income statement. 2. Prepare a single step income statement. 3. Next Level Discuss how Gold Companys income statement in Requirement I might be different if it used IFRSarrow_forward
- Analyze Target The following data (in millions) are taken from the financial statements of Target Corporation (TGT), the owner of Target stores: a. For Target, determine the amount of change in millions and the percent of change rounded to one decimal place from Year 1 to Year 2 for: 1. Revenue 2. Operating expenses 3. Operating income b. What conclusions can you draw from your analysis of the revenue and total operating expenses?arrow_forwardUse the following income statement of Elliott Game Theory Consulting to determine its net operating profit after taxes (NOPAT). Use 25% as the tax rate. Elliott Game Theory Consulting Income Statement for Year Ending December 31arrow_forwardQUESTION 18 Calculate the accounting profit and economic profit for each of the following firms (amounts are in millions of dollars). Which answer is correct? Apple BP Tesla Sales $40,091 $5,730 $2,750 Wages and salaries $29,052 $4,932 $500 Cost of equity capital $12,100 $750 $35 Interest on debt $7,585 $275 $5 Cost of materials $6,500 $556 $1,650 Accounting profit Economic profit a. Accounting profit $6,954 $967 $695 Economic profit -$5,146 $217 $660 b. Accounting profit -$3,046 -$33 $595 Economic profit -$15,146 -$783 $560 c. Accounting profit -$15,146 -$783 $560 Economic profit -$3,046 -$33 $595 d. Accounting profit -$3,046 -$33 $595 Economic profit -$5,146 -$283 $1060 e. Accounting profit -$5,146 $217 $660…arrow_forward
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How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License