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Class, here’s a great opportunity for a peer response. Take alook at the ratios below. Select a category and examine how theseratios might be useful to an external financial statement user:Liquidity Ratios Working Capital = Current Assets – CurrentLiabilities Current Ratio = Current Assets / Current LiabilitiesQuick Ratio = (Current Assets – Inventory) / Current LiabilitiesLong-Term Solvency Ratios Debt to Assets Ratio = Total Liabilities/ Total Assets Debt to Equity Ratio = Total Liabilities / TotalEquity Interest Coverage Ratio = Earnings before interest and taxes/ Interest Expense

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Collen Von
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6 Aug 2019

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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

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 – RNOA

Net Operating assets RNOA= NPOAT/Average NOA

Net Operating Profit After Taxes – NOPAT

Net operating profit after taxes= net income- (nonperatinge revenues-nonoperating expenses)x(1-marginal tax rates)

Net Operating Profit Margin – NOPM

NPOM= NOPAT/Sales Revenue

Net Operating Asset Turnover – 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)

Debt Management Ratios

Financial statements for Remington Inc. follow.

RemingtonInc.
ConsolidatedStatements of Income
(In thousands exceptper share amounts)
2013 2012 2011
Net sales $ 7,245,088 $ 6,944,296 $ 6,149,218
Cost of goods sold (5,286,253) (4,953,556) (4,355,675)
Gross margin $ 1,958,835 $ 1,990,740 $ 1,793,543
General and administrativeexpenses (1,259,896) (1,202,042) (1,080,843)
Special and nonrecurring items 2,617 - -
Operating income $ 701,556 $ 788,698 $ 712,700
Interest expense (63,685) (62,398) (63,927)
Other income 7,308 10,080 11,529
Gain on sale of investments - 9,117 -
Income before income taxes $ 645,179 $ 745,497 $ 660,302
Provision for income taxes 254,000 290,000 257,000
Net income $ 391,179 $ 455,497 $ 403,302
Net income per share $1.08 $1.25 $1.11
RemingtonInc.
ConsolidatedBalance Sheets
(In thousands)
ASSETS Dec. 31,2013 Dec. 31,2012
Current assets:
Cashand equivalents $ 320,558 $ 41,235
Accounts receivable 1,056,911 837,377
Inventories 733,700 803,707
Other 109,456 101,811
Total current assets $2,220,625 $1,784,130
Property and equipment, net 1,666,588 1,813,948
Other assets 205,342 248,372
Total assets $4,092,555 $3,846,450
LIABILITIES ANDSTOCKHOLDERS' EQUITY
Currentliabilities:
Accounts payable $ 250,363 $ 309,092
Accrued expenses 347,892 274,220
Other current liabilities 15,700 -
Income taxes 93,489 137,466
Total current liabilities $ 707,444 $ 720,778
Long-term debt $ 650,000 $ 541,639
Deferred income taxes 275,101 274,844
Other long-term liabilities 61,267 41,572
Total liabilities $1,693,812 $1,578,833
Stockholders'equity:
Common and preferred stock $ 189,727 $ 189,727
Additional paid-in capital 128,906 127,776
Retained earnings 2,397,112 2,136,794
$2,715,745 $2,454,297
Less: Treasury stock, at cost (317,002) (186,680)
Total stockholders' equity 2,398,743 $2,267,617
Total liabilities and stockholders'equity 4,092,555 $3,846,450

Required:

Using Remington's financial statements as shown above, respondto the following requirements.

1. Compute the five debt management ratios for2012 and 2013. Round your answers to two decimal places.

2013 2012
Times interest earned
Debt to equity ratio
Debt to total assets ratio
Long-term debt to equity ratio
Long-term debt to total assetsratio

2. Conceptual Connection: Indicate whether theratios have changed significantly from 2012 to 2013.

Select All the ratios decreased,Times interest earned ratiodecreased, other ratios did not change by much., Debt to equityratio decreased, other ratios did not change by much., Debt tototal assets ratio decreased, other ratios did not change by much,Long-term-debt to equity ratio decreased, other ratios did notchange by much, Long-term-debt to total assets ratio decreased,other ratios did not change by much.

B. Do the ratios suggest that Remington is more or less riskyfor long-term creditors at December 31, 2013, than at December 31,2012? Explain.

SelectMore risky for long-term creditors Less risky forlong-term creditors

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