ACCT 001 Lecture Notes - Lecture 20: Financial Statement, Asset Turnover, Income Statement

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graycricket860

18 Sep 2020

School

College of The Sequoias

Department

Accounting (ACCT)

Course

ACCT 001

Professor

cooper

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Document Summary

Roa may be affected by changes in profit margin and/or changes in asset turnover. Ability to pay its short term debts when they are due. Current ratio: current assets and current liabilities. Similar to current ratio: current assets without inventory, as inventory needs to be sold. Ability of the company to continue operations in the long term: debt to equity ratio, debt to assets ratio, leverage. Measure of the proportion of borrowings to owner"s investments. Indicates the company"s policy regarding financing of its assets. If > 1 then assets are financed mostly with debt: too high of a ratio is a warning regarding risk, debt to assets ratio. Indicates the proportion of assets financed by liabilities: the higher the ratio, the greater risk will be associated with the firms operations. Industry averages: past records, business strategy, general market conditions, abnormal situations.

Related Questions

Silver ComputerCorporation

Use the financial statementsbelow to complete a financial ratio analysis.

The ratios should becalculated on the ratio worksheet. Make sure to reference

amounts from the statementsonto your ratios. Be sure that your answer

uses the correct format forthat ratio: times, percentage, days, dollar amount.

RatioFormat:

Show with your answer whetherthe ratio is times, perentage, or dollar amount.

For example:

Current ratio is times, so it would be shown as anumber compared to one.

(ie. 2.08 to 1 or 2.08:1 )

Working capital is a dollar amount, so it would beshown as currency.

(ie. $11, 190 )

Net margin is a percentage, so it would be shownwith a % sign.

(ie. 12.7% )

Take a look at the ratiodescriptions in the textbook to determine if the ratio is

times, percentage, or dollaramount.

Decimal Places onRatios

The following are typicallyaccepted rules for decimal places on ratios:

Ratios: two decimal places

Dollars: two decimal places (the book showed threedecimal places for

earnings per share but we don't need to do that forthis class)

Days: one decimal place

Percentages: one decimal place (the textbook showedpercentages to two

decimal places but I think that is overkill)

Price-Earnings ratio: two decimal places

Times: two decimal places

Silver ComputerCorporation

IncomeStatement

For the Year EndedDecember 31, 2016

Other revenue and expense

Income before incometaxes

Silver ComputerCorporation

Comparative BalanceSheets

As of December 31,2016 and 2015

Assets

Marketable securities

Merchandise inventory

Total plant and equipment

Liabilities

Total current liabilities

Long-term liabilities

Long-term notes payable

Stockholder's Equity

Total stockholder'sequity

Total liabilities &equity

Notes for preparationof financial ratios:

All of Silver Corporations sales were onaccount.

1,692 shares of common stock were outstanding atthe end of 2016.

$2.50 of dividends per share were paid in2016.

The market price per share of Silver stock was$34.00 for all of 2016.

Answer this question

SilverComputer Corporation
Liquidity and SolvencyFinancial Ratios

LiquidityRatios
Note - Working Capitalshown as an example to follow on the remainingratios.

Working Capital	16,540
	10,350	1.6:1

Current ratio


Quick ratio
* Quick assets are cash,marketable securities, and accounts receivable

Accounts receivableturnover


Average days to collectreceivables


Inventory turnover


Average days to sellinventory


Operating cycle


Solvency Ratios(Long-term credit risk)

Debt ratio


Interest coverage ratio

coppergnu114

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

Required - Using the attached- below- financial statements for Coca-Cola calculate the following ratios for 2014 - Hint: use excel to set up the formulas and amounts to calculate (see below chart)

https://www.sec.gov/Archives/edgar/data/21344/000002134415000005/a2014123110-k.htm

Liquidity ratio
Current assets	92023
Current liabilities	32374
Current ratio is current asset/current liabilities	92023/32374= 2.84
Quick assets=current assets- inventory + prepaid expenses	92023-3100+3066= 91989
Quick ratio is quick assets/current liabilities	91989/32374= 2.84
Calculate debt to equity ratio= Total liabilities/ total stockholder equity
Times interest earned= Earnings before interest and taxes (EBIT)/interest expense
Return on Net Operating Assets â RNOA Net Operating assets RNOA= NPOAT/Average NOA
Net Operating Profit After Taxes â NOPAT Net operating profit after taxes= net income- (nonperatinge revenues-nonoperating expenses)x(1-marginal tax rates)
Net Operating Profit Margin â NOPM NPOM= NOPAT/Sales Revenue
Net Operating Asset Turnover â NOAT NOAT= Sales/Average NOA


Note 1	*Coca-Cola*
	Operating Assets
	Total assets - Non-operating assets
	(ie NOA = Total assets less Short-term investments + Other investments

	Operating Liabilities
	Total liabilities - Non-operating liabilities
	ie NOL = Total liabilities - Loans and notes payable + Current maturities of long-term debt+Long-term debt)

ACCT 001 Lecture Notes - Lecture 20: Financial Statement, Asset Turnover, Income Statement

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