ACCT 110 Lecture Notes - Lecture 20: Santa Barbara City College, Inventory Turnover, Operating Lease

14 views2 pages

cerisehedgehog991

2 Dec 2020

School

Department

Course

Professor

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Liquidity - measures short-term ability to pay maturing obligations and meet unexpected cash needs within the next year: current ratio, receivables turnover ratio. Solvency - measures ability to meet long-term obligations: debt to total assets, times interest earned. Indicates the extent to which a company"s assets are financed by debt: debt to total assets = total liabilities / total assets, lower is better. Provides an indication of a company"s ability to meet interest payments as they come due: times interest earned = (net income + interest expense + income tax expense (ebit)) / interest expense, higher is better. Debt to total assets 40% in 2018, 52% in 2017. Times interest earned 7 times in 2018, 11 times in 2017: identify whether the change in each ratio is an improvement or deterioration, did the company"s overall solvency improve or deteriorate in 2018. Deterioration, because company struggled to make interest payments (times interest earned)

Related Questions

Ratio	2010	2009	2008	2010 Industry Average
Long-term debt	0.45	0.40	0.35	0.35
Inventory turnover	62.65	42.42	32.25	53.25
Depreciation/total assets	0.25	0.014	0.018	0.015
Daysâ sales in receivables	113	98	94	130.25
Debt to equity	0.75	0.85	0.90	0.88
Profit margin	0.082	0.07	0.06	0.075
Total asset turnover	0.54	0.65	0.70	0.40
Quick ratio	1.028	1.03	1.029	1.031
Current ratio	1.33	1.21	1.15	1.25
Times interest earned	0.9	4.375	4.45	4.65
Equity multiplier	1.75	1.85	1.90	1.88

Referring to the given data, the CEO of WQY Inc. wrote, "2008was a good year for the firm with respect to our ability to meetour short-term obligations. We had higher liquidity largely due toan increase in highly liquid current assets (cash, accountreceivables, and short-term marketable securities)."

Do you think the CEO is correct in making this statement?Explain your stand and use only the given data for youranalysis.

Submission Requirements:

Submit the completed assessment as a Word document.

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)

(Liquidity analysis and interpretation)

Refere to Simon Company information below. The companys incomestatements for the year ended December 31, 2015 and 2014, follow.Assume that all sales are on credit and the compte: (1) day's salesuncollected, (2) accounts receivable turnover, (3) inventoryturnover, and (4) days's sales in inventory. Comment on the changesin the ratios from 2014 a to 2015. (round amounts to onedecimal)

2. (Risk and capital structure analysis) Compare the company'slong-term risk and capital structure positions at the end of 2015and 2014 by computing ratios: (1) debt and equity ratios-percentrounded to one decimal, (2) debt-to equity ratio - rounded to twodecimals and (3) times interest earned-rounded to one decimal.Comment on these ratio results.

For Year ended December 31		2015		2014
sales		$673,500		$532,000
Cost of goods sold	$411,225		$345,500
Other operating expenses	209,550		134,980
Interest expense	12,100		13,300
Income taxes	9,525		8,845
Total cost and expenses		642,400		502,625
Net income		31,100		29,375
Earnings per share		1.90		1.80

Simon Companys information: At December 31	2015	2014	2013
Assets
Cash	$31,800	$35,625	$37,800
Accounts receivable,net	89,500	62,500	50,200
Merchandise inventory	112,500	82,500	54,000
Prepaid expenses	10,700	9,375	5,000
Plant assets,net	278,500	255,000	230,500
Total assets	$523,000	$445,000	$377,500
Liabilities and Equity
Accounts payable	$129,900	$75,250	$51,250
Long-term notes payable secured by mortgage on plant assets	98,500	101,500	83,500
Common Stock, $10 par value	163,500	163,500	163,500
Retained earnings	131,100	104,750	79,250
Total Liabilities and equity	$523,000	$445,000	$377,500

periwinklelouse323

ACCT 110 Lecture Notes - Lecture 20: Santa Barbara City College, Inventory Turnover, Operating Lease

Document Summary

Get access

Related Documents

ACCT 110 Lecture Notes - Lecture 3: Santa Barbara City College, The Monthly, Financial Statement

ACCT 110 Lecture Notes - Lecture 18: Santa Barbara City College, Canada Pension Plan, Accounts Payable

ACCT 110 Lecture Notes - Lecture 27: Santa Barbara City College, Accounts Payable, Loyalty Program

Related Questions