Fundamentals Of Financial Accounting
6th Edition
ISBN: 9781259864230
Author: PHILLIPS, Fred, Libby, Robert, Patricia A.
Publisher: Mcgraw-hill Education,
expand_more
expand_more
format_list_bulleted
Videos
Textbook Question
Chapter 13, Problem 11ME
Identifying Relevant Ratios
Identify the ratio that is relevant to answering each of the following questions.
- a. How much net income does the company earn from each dollar of sales?
- b. Is the company financed primarily by debt or equity?
- c. How many dollars of sales were generated for each dollar invested in fixed assets?
- d. How many days, on average, does it take the company to collect on credit sales made to customers?
- e. How much net income does the company earn for each dollar owners have invested in it?
- f. Does the company have sufficient assets to convert into cash for paying liabilities as they come due in the upcoming year?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Identify the ratio that is relevant to answering each of the following questions.a. How much net income does the company earn from each dollar of sales?b. Is the company financed primarily by debt or equity?c. How many dollars of sales were generated for each dollar invested in fixed assets?d. How many days, on average, does it take the company to collect on credit sales made tocustomers?e. How much net income does the company earn for each dollar owners have invested in it?f. Does the company have sufficient assets to convert into cash for paying liabilities as theycome due in the upcoming year?
Select the Income Statements and Balance
Sheets of Aramco Saudi from the calculate
the following financial ratios:
a. Long-term debt ratios
b. Total debt ratio
c. Times interest earned
d. Cash coverage ration
e. current ratio
f. Quick ratio
g. Operating profit margin
h. Inventory Turnover
i. Days in inventory
j. Average collection period
k. Return on equity
I. Return on assets
m. Payout rations
Which of the following is included in the numerator of the Acid-Test Ratio calculation (check all that apply)
A. Supplies
B. Net Current Receivables
C. Short-Term Investments
D. Merchandise Inventory
Which of the following ratios helps measure a company's ability to pay its current liabilities? (check all that apply)
A. Accounts Receivable Turnover
B. Days' Sales in Inventory
C. Acid Test Ratio
D. Cash Ratio
Chapter 13 Solutions
Fundamentals Of Financial Accounting
Ch. 13 - What is the general goal of trend analysis?Ch. 13 - Prob. 2QCh. 13 - What is ratio analysis? Why is it useful?Ch. 13 - What benchmarks are commonly used for interpreting...Ch. 13 - Prob. 5QCh. 13 - Prob. 6QCh. 13 - Slow Cellars current ratio increased from 1.2 to...Ch. 13 - From last year to this year, Colossal Companys...Ch. 13 - From last year to this year, Berry Bam reported...Ch. 13 - Explain whether the following situations, taken...
Ch. 13 - What are the two essential characteristics of...Ch. 13 - Prob. 12QCh. 13 - Prob. 13QCh. 13 - Prob. 14QCh. 13 - Prob. 15QCh. 13 - Prob. 16QCh. 13 - 1. Which of the following ratios is not used to...Ch. 13 - Prob. 2MCCh. 13 - Prob. 3MCCh. 13 - Analysts use ratios to a. Compare different...Ch. 13 - Which of the following ratios incorporates stock...Ch. 13 - Prob. 6MCCh. 13 - Prob. 7MCCh. 13 - A bank is least likely to use which of the...Ch. 13 - Prob. 9MCCh. 13 - (Supplement 13A) Which of the following items is...Ch. 13 - Calculations for Horizontal Analyses Using the...Ch. 13 - Calculations for Vertical Analyses Refer to M13-1....Ch. 13 - Interpreting Horizontal Analyses Refer to the...Ch. 13 - Interpreting Vertical Analyses Refer to the...Ch. 13 - Prob. 5MECh. 13 - Prob. 6MECh. 13 - Prob. 7MECh. 13 - Analyzing the Inventory Turnover Ratio A...Ch. 13 - Inferring Financial Information Using the Current...Ch. 13 - Prob. 10MECh. 13 - Identifying Relevant Ratios Identify the ratio...Ch. 13 - Prob. 12MECh. 13 - Analyzing the Impact of Accounting Alternatives...Ch. 13 - Describing the Effect of Accounting Decisions on...Ch. 13 - Prob. 1ECh. 13 - Prob. 2ECh. 13 - Prob. 3ECh. 13 - Prob. 4ECh. 13 - Prob. 5ECh. 13 - Matching Each Ratio with Its Computational Formula...Ch. 13 - Computing and Interpreting Selected Liquidity...Ch. 13 - Prob. 8ECh. 13 - Prob. 9ECh. 13 - Prob. 10ECh. 13 - Prob. 11ECh. 13 - Prob. 12ECh. 13 - Prob. 13ECh. 13 - Prob. 14ECh. 13 - Analyzing the Impact of Alternative Inventory...Ch. 13 - Prob. 1CPCh. 13 - Prob. 2CPCh. 13 - Prob. 3CPCh. 13 - Prob. 4CPCh. 13 - Prob. 5CPCh. 13 - Prob. 6CPCh. 13 - Prob. 7CPCh. 13 - Prob. 1PACh. 13 - Prob. 2PACh. 13 - Prob. 3PACh. 13 - Prob. 4PACh. 13 - Prob. 5PACh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PACh. 13 - Prob. 1PBCh. 13 - Prob. 2PBCh. 13 - Prob. 3PBCh. 13 - Prob. 4PBCh. 13 - Prob. 5PBCh. 13 - Using Ratios to Compare Loan Requests from Two...Ch. 13 - Prob. 7PBCh. 13 - Prob. 1SDCCh. 13 - Prob. 2SDCCh. 13 - Prob. 5SDCCh. 13 - Prob. 6SDCCh. 13 - Prob. 7SDCCh. 13 - Prob. 1CC
Knowledge Booster
Learn more about
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
- What information can best be elicited from a receivable ratio? A. company performance with current debt collection B. credit extension effect on cash sales C. likelihood of future customer bankruptcy filings D. an increase in future credit sales to current customersarrow_forwardIdentify which of the following six metrics a through f best completes questions 1 through 3 below. a. Days’ sales uncollected d. Return on total assets b. Accounts receivable turnover e. Total asset turnover c. Working capital f. Profit margin 1. Which two ratios are key components in measuring a company’s operating efficiency? Which ratio summarizes these two components? 2. What measure reflects the difference between current assets and current liabilities? 3. Which two short-term liquidity ratios measure how frequently a company collects its accounts?arrow_forwardThe current ratio: a. Is used to help assess a company's ability to pay its debts in the near future. b. Measures the effect of operating income on profit. c. Is used to measure the relationship between assets and long-term debt. d. Is used to measure a company's collection period.arrow_forward
- 5. Profitability ratios Profitability ratios help in the analysis of the combined impact of liquidity ratios, asset management ratios, and debt management ratios on the operating performance of a firm. Your boss has asked you to calculate the profitability ratios of Diusitech Inc. and make comments on its second-year performance as compared with its first-year performance. The following shows Diusitech Inc.'s income statement for the last two years. The company had assets of $4,700 million in the first year and $7,518 million in the second year. Common equity was equal to $2,500 million in the first year, and the company distributed 100% of its earnings out as dividends during the first and the second years. In addition, the firm did not issue new stock during either year. Diusitech Inc. Income Statement For the Year Ending on December 31 (Millions of dollars) Year 2 Year 1 2,540 2,000 1,610 1,495 127 80 1,737 803 80 723 181 542 Net Sales Operating costs except depreciation and…arrow_forwarda) Calculate the following ratios i)Gross profit ii)Net profit before taxi iii)Current ratio iv)Accounts receivable turnover in days v)Inventory turnover in days vi)Accounts payable turnover vii)Times interest covered viii)Debt/equity. b)Comment on the profitability and stability of the company using the ratios calculated in (a)(plus any others you think may be relevant) and make recommendations to your friend.arrow_forwardSolve and perform the different financial ratios using the financial statements of XYZ Company for the year 2021. 1. Current Ratio 2. Quick Ratio 3. Receivables Turnover 4. Inventory Turnover 5. Debt Ratio 6. Equity Ratio 7. Times Interest Earned 8. Gross Profit Margin 9. Operating Profit Margin 10. Net Profit Marginarrow_forward
- Directions: Read each sentence carefully and detemine whether the statement is TRUE or FALSE. Write your answers onthe space provided before each number. 1. Profitability ratios measure the ability of the company's assets and invested capital to generate sales. 2. Čunent ratio is generally higher than quick ratio. 3. Using anothercompany as benchmark, the company with highernet profitmarginis more profitable. 4. Accounts receivable turnover measures the number of days in the company's average collections period. 5. Firancial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. - 6. Given equal gross profit margin, the company with the better operating income margin has higher operating expenses as a percentage of sales. 7. Debt to equity ratio measures the percentage of assets financed by equity. 8. Gross profit margin provide an indication of…arrow_forwardFrom the given Statement of Financial Position and Income statement, solve for the following: 1) Compute the FINANCIAL ratios that measure: c) Operating Activity -Accounts Receivable Turnover -Days Sales in Receivable -Inventory Turnover -Days in Inventory d) Profitability -Earnings per Share -Return on Asset -Return on Equity -Operating Profit Margin -Net Profit Margin 2) Analyze, interpret, and draw conclusions based on the results of your computations.arrow_forwardAlex is currently considering to invest his money in one of the companies betweenCompany A and Company B. The summarized final accounts of the companies for theirlast completed financial year are as follows: (refer to the images) Required:a. Calculate the following ratios for Company A and Company B. State clearly theformulae used for each ratio:i. Gross Profit Marginii. Net Profit Marginiii. Inventory Turnover Period (days)iv. Receivables Collection Period (days)v. Payables Payment Period (days)vi. Current Ratiovii. Quick Ratiob. Comment on each of the ratios calculated in part (a) above.arrow_forward
- 1. Compute the following ratios for the comparative periods (2018 and 2019). The company used 365 days in its computation for some of the ratios. Show your solution. d. Accounts Receivable Turnover Ratio e. Average Collection Period f. Inventory Turnover Ratio g. Average Days in Inventory h. Number of days in Operating Cycle i. Debt to Total Assets Ratio j. Debt to Equity Ratio k. Times Interest Earned Ratio l. Gross Profit Ratio m. Profit Margin Ratio n. Return on Assets o. Return on Equity p. Assets Turnover Ratioarrow_forwardConsider the following company’s balance sheet and income statement. For this company, calculate the following: Current ratio. Number of days’ sales in receivables. Sales to total assets.arrow_forwardWhat is accounts payable turnover?a. Purchases on account divided by average accounts payableb. A measure of liquidityc. A measure of the number of times a year a company is able to pay its accounts payabled. All of the listed answers are correct.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
Principles of Accounting Volume 1
Accounting
ISBN:9781947172685
Author:OpenStax
Publisher:OpenStax College
Financial ratio analysis; Author: The Finance Storyteller;https://www.youtube.com/watch?v=MTq7HuvoGck;License: Standard Youtube License