ACCT 217 Lecture 25: Ratio Analysis

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coralfrog569

20 Apr 2015

School

University of Calgary

Department

Accounting

Course

ACCT 217

Professor

Darrin Ambrose

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Document Summary

Intercompany basis comparisons between one or more competitor companies. Liquidity ratios: measure short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. Solvency ratios: measure the ability of the company to survive over a long period of time. Profitability ratios: measure the earnings or operating success of a company for a given period of time. Liquidity ratios measure a company"s ability to pay their current liabilities. Days in inventory: working capital measures the ability of a company to pay its debts in the short- term (less than 12 months) Working capital = current assets current liabilities: current ratio measures the ability of a company to pay its debts in the short- term (less than 12 months) Current ratio = current assets / current liabilities: the same as the current ratio however, it uses the cash balance over the course of the period, instead of just using ending balances.

Related Questions

1. The formula for Accounts Receivable turnover is

Select one:

a. Net Sales / average accounts receivable

b. Cost of goods sold / average accounts receivable

c. Net Sales / average merchandise inventory

d. 360 days / average accounts receivable

2. The category of ratios that determine the economic status ofpublicly-traded companies is

Select one:

a. Profitability ratios

b. Market value ratios

c. Liquidity Ratios

d. Solvency ratios

3. The working capital ratio is

Select one:

a. Quick assets / current liabilities

b. Working capital /current liabilities

c. Current assets minus current liabilities

d. Current assets/current liabilities

4. Earnings per share is calculated by

Select one:

a. Dividing net income by the authorized ordinary shares.

b. Dividing net income less preferred dividends by number ofordinary shares outstanding.

c. None of the above.

d. Dividing net income by the total number of ordinary andpreferred shares issued.

5. Which of the following belong to the profitabilityratios?

Select one:

a. Rate of return on equity

b. Rate of return on assets

c. All of the above

d. Gross Profit Margin

6. The category of ratios that shows the ability of the firm topay its long-term obligations is

Select one:

a. Profitability ratios

b. Solvency ratios

c. Market value ratios

d. Liquidity Ratios

7. Operating profit margin equals

Select one:

a. Income from operations / sales

b. Net income / sales

c. Gross profit / sales

d. Profit from operations / cost of sales

8. The following are quick assets except

Select one:

a. Short-term investments

b. Merchandise Inventory

c. Accounts Receivable

d. Cash

9. The following are liquidity ratios except

Select one:

a. Earnings per share

b. Working capital ratio

c. Quick ratio

d. Receivable turnover

10. Quick assets equals

Select one:

a. All current assets

b. Cash and Accounts receivable only.

c. Total assets less non-current assets

d. Current assets minus inventory

jadebear393

A company has asked you to determine whether the companyability to pay it's current liabilities and it's total liabilitiesimproved or deteriorated in 2015.

2015 2014

CASH $58,000. $75,000.

SHORT-TERM INVESTMENTS 31,000. 0

NET ACCOUNTS RECEIVABLE 110,000. 132,000.

MERCHANDISE INVENTORY 247,000. 297,000

TOTAL ASSETS 585,000. 535,000.

TOTAL CURRENT LIABILITIES 255,000. 222,000.

LONG-TERM NOTES PAYABLE 46,000. 48,000.

INCOME FROM OPERATIONS 180,000. 153,000.

INTEREST EXPENSE 52,000. 39,000.

Compute the following ratios for 2015 and 2014, andevaluate the company's ability to pay it's current and totalliabilities. a. Current ratio b. Cash ratio c. Acid-test ratio d.Debt ratio e. Debt to equity ratio,

byzantiumpig568

6Assets and earnings are reported on balance sheets. A) True B)False

7. Working capital measures the abilty of a business to pay offits short term debt. A) True B) False

8. Current ratios are used to analyze profitability. A) True B)False

9. Quick ratio calculations analyze earnings. A) True B)False

10. Liquidity, solvency, and profitability are interrelated. A)True B) False

violetferret341

ACCT 217 Lecture 25: Ratio Analysis

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