ACCT 001 Lecture Notes - Lecture 19: Inventory Turnover, Gross Margin, Accounts Receivable

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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

Ratios: return on assets (roa, return on equity (roe, profit margin (pm, earnings per share (eps) How well the company performed and likely to perform in the future. These ratios should all exceed zero (i. e. positive return) You would prefer their values to all be as high as possible. Values of these ratios generally range between 5% and 20: look to the industry norm, previous period, trend increasing or decreasing, unusual event. Rate of return on the amount of shareholders equity. Percentage of sales revenue that ends up as profit: 100% would indicate all sales revenue ends up as profit, i. e. no expenses which is impossible. Profit margin gives some indication of pricing strategy or competition intensity in the industry: a discount retailed in a competitive market would have a low profit margin, a high and exclusive retailed will have a high margin. Gross margin provides a further indication of the company"s product pricing and product mix.

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

Using the financial statements for the Snider Corporation,calculate the 13 basic ratios found in the chapter.

SNIDER CORPORATION
Balance Sheet
December 31, 2013
Assets
Current assets:
Cash $ 51,800
Marketable securities 24,200
Accounts receivable (net)174,000
Inventory 227,000

Total currentassets $ 477,000
Investments 63,500

Plant and equipment. $ 646,000
Less: Accumulated depreciation246,000

Net plant and equipment 400,000

Total assets $ 940,500

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 91,100
Notes payable 73,400
Accrued taxes 18,400

Total currentliabilities $ 182,900
Long-term liabilities:
Bonds payable 156,700

Total liabilities $ 339,600
Stockholders' equity
Preferred stock, $50 par value $100,000
Common stock, $1 par value80,000
Capital paid in excess of par190,000
Retained earnings 230,900

Total stockholders'equity $ 600,900

Total liabilities and stockholders' equity $940,500

SNIDER CORPORATION
Income Statement
For the Year Ending December 31, 2013
Sales (on credit) $ 2,034,000
Cost of goods sold 1,308,000

Gross profit $ 726,000
Selling and administrative expenses 488,000 *

Operating profit (EBIT) $ 238,000
Interest expense 34,900

Earnings before taxes (EBT) $ 203,100
Taxes 89,300

Earnings after taxes (EAT) $ 113,800

*Includes $36,600 in lease payments.

Using the above financial statements for the Snider Corporation,calculate the following ratios.

Profitability ratios. (Do not round intermediate calculations.Input your answers as a percent rounded to 2 decimal places.)

Profitability Ratios
Profit margin %
Return on assets (investment) %
Return on equity %

Assets utilization ratios. (Do not round intermediatecalculations. Round your answers to 2 decimal places.)

Assets Utilization Ratios
Receivable turnover times
Average collection period days
Inventory turnover times
Fixed asset turnover times
Total asset turnover times

Liquidity ratios. (Do not round intermediate calculations. Roundyour answers to 2 decimal places.)

Liquidity Ratios
Current ratio times
Quick ratio times

Debt utilization ratios. (Do not round intermediatecalculations. Input your debt to total assets answer as a percentrounded to 2 decimal places. Round your other answers to 2 decimalplaces.)

Debt Utilization Ratios
Debt to total assets %
Times interest earned times
Fixed charge coverage times

coffeeelephant977

Analysis and Use of Financial StatementsProject

NIKE Inc.

https://www.sec.gov/Archives/edgar/data/320187/000032018715000113/nke-5312015x10k.htm

This assignment requires financial ratio analysis on Nike Inc.company. You will be required to examine Nike's companyâs annualreport and calculate the ratios listed below. You will calculatethe ratios for the two most recent years fromavailable annual reports.

Once you have performed an analysis of the financial statements,you will write up a report summarizing thefindings. The report will include a brief introduction,synopsis of the companyâs business and current business situation,a summary of the studentâs interpretation of teamâs analysis, and aconclusion.

Written proof of how the ratios were calculated MUST beattached to the report. You must calculate the ratiosyourself.

Use the attached work page below to show proof of yourcalculations of the ratios (show all numbers in the calculations ânot just the end result). The paper should be six (4) typedpages (not including the ratios and the ratiocalculations). Roughly, the paper should have one page ofintroduction, four pages of analysis and interpretation, and onepage of conclusion. The focus should be on the analysis and yourinterpretation.

The analysis of the financial ratios should include insightsinto the meanings behind the ratios. The ratios should tell a storyabout how the company is doing and its prospects for the future.You need to tell that story. In order to make the ratios moremeaningful, a benchmark company or industry average for each ratioshould also be included. You must calculate the benchmark companyâsratios as well. I do not need these calculations attached. Theconclusion should provide insight into the financial future of thecompany. An investment recommendation should also be made in theconclusion.

Required ratios:

Liquidity Ratios and Asset Utilizationratios:

Current Ratio

Quick Ratio

Accounts receivable turnover

Inventory turnover

Average collection period

Total assets turnover

Fixed Asset turnover

Solvency & Leverage Ratios

Times interest earned

Debt-to-equity ratio

Debt to total assets

Fixed charge coverage

Profitability Ratios:

Profit margin ratio

Gross Margin ratio

Return on total assets

Return on common stockholdersâ equity

Evidence of Ratio Calculations

Please show your calculations of the financial rations of thecompany in the column labeled âYour Company.â You can calculate theratios by hand or attached a sheet that clearly demonstrates howyou calculated the ratio (i.e. X/Y = Z). The ratios you provide foryour competitor or industry average do not need to be calculated(you can find these on various finance websites â though you willmost likely have to calculate some yourself). Pleaseattached this sheet to the back of your writtenproject.

Ratio	Your Company	Competitor/Industry Avg.
Current Ratio
Quick Ratio
A/R Turnover
Inventory Turnover
Average collection period
Total Assets Turnover
Fixed Asset turnover
Times-interest Earned Ratio
Debt-to-Equity Ratio
Fixed charge coverage
Profit Margin Ratio
Gross Margin Ratio
Return-on-Total Assets Ratio
Return-on-Common Stockholdersâ Equity Ratio

skyant786

ACCT 001 Lecture Notes - Lecture 19: Inventory Turnover, Gross Margin, Accounts Receivable

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