MGAB01H3 Chapter Notes - Chapter 3: Asset Turnover, Retained Earnings, Deferred Income
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MGAB01H3 Full Course Notes
Verified Note
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Document Summary
* re, april 30 = net earnings, ,420 dividends, ,500 = After analyzing the effects of the transactions for alpine stables, inc. for. April, the company appears to have net earnings of ,420, which is 81% of sales revenue (a very high return on sales!). However, it is extremely important to note that this calculation of net earnings is based on unadjusted amounts. There are several additional expenses that will decrease the unadjusted net earnings. These include depreciation (of the barns), supplies used, insurance, interest, wages and income taxes. It would be useful to forecast the earnings and cash flows each month for the upcoming year to assess whether the earnings and positive cash flows are likely to continue into the foreseeable future. The asset turnover ratio decreased since i joined the company three years ago. The ratio for 2016 is lower than it otherwise would have been given the shareholders" decision to build a riding arena.
