Business Administration - Accounting & Financial Planning FIN401 Study Guide - Midterm Guide: Current Liability, Quick Ratio, Accounts Receivable

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greenmuskrat329

3 Jan 2018

School

Seneca College

Department

Business Administration - Accounting & Financial Planning

Course

Business Administration - Accounting & Financial Planning FIN401

Professor

Larry Hurst

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Document Summary

Asset utilization: estimates the number of times, ending inventory was turned over". Average days sales in inventory (adsi: estimates the number of days of sales tied up in inventory (based on ending inventory values) Looks at the firm"s ability to pay its bills in the short run (within 12 months) without undue stress. Used to evaluate a firm"s ability to meet current obligations when inventory is considered to be a concern. Also called "acid test" or "liquid" ratio, considers only cash, marketable securities (cash equivalents) and accounts receivable because they are considered to be the most liquid forms of current assets. A quick ratio less than 1. 0 implies dependency on inventory and other current assets to liquidate short-term debt. These look at the firm"s ability to meet its obligations in the long run. Reveal extent to which firm is financed with debt and the likelihood of defaulting on debt obligations. Debt/equity ratio = total debt/total equity ( interest bearing debt)

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

Hillside,Inc.

BALANCE SHEET					INCOME STATEMENT
($ in millions)					($ in millions)

ASSETS		LIABILITIES			Revenue	28,681.10
Cash & Marketable Securities	449.90	Accounts Payable	1,611.20		Cost Of Goods Sold	20,768.80
Accounts Receivable	954.80	Salaries Payable	225.20		Gross Profit	7,912.30
Inventories	3,645.20	Other Current Liabilities	1,118.80
Other Current Assets	116.60	Total Current Liabilities	2,955.20		Operating Expenses:
Total Current Assets	5,166.50				Selling, General & Admin.	5,980.80
		Other Liabilities	693.40		Depreciation	307.30
Machinery & Equipment	1,688.90				Operating income	1,624.20
Land	1,129.70	Total Liabilities	3,648.60
Buildings	2,348.40				Interest	-
Depreciation	(575.60)	SHAREHOLDER'S EQUITY			Other Expense (Income)	(13.10)
Property, Plant & Equip. - Net	4,591.40	Common Stock	828.50		Income Before Taxes	1,637.30
Other Long Term Assets	120.90	Retained Earnings	5,401.70		Income Taxes	618.10
Total Long-Term Assets	4,712.30	Total Shareholder's Equity	6,230.20		Net Income	1,019.20

Total Assets	9,878.80	Total Liabilities & Equity	9,878.80
					Number of Common Stock
					Shares Outstanding	1,032,271


		Input Answers Below		Financial Performance Summary
LIQUIDITY RATIOS
Current Ratio (times)
Quick Ratio (times)
Average Payment Period (days)

ASSET MANAGEMENT RATIOS
Total Asset Turnover (times)
Average Collection Period (days)
Inventory Turnover (times)

FINANCIAL LEVERAGE RATIOS
Total Debt to Total Assets
Equity Multiplier (times)

PROFITABILITY RATIOS
Operating Profit Margin
Net Profit Margin
Return on Total Assets
Return on Equity
Earnings per Share

viridianporcupine777

Business Administration - Accounting & Financial Planning FIN401 Study Guide - Midterm Guide: Current Liability, Quick Ratio, Accounts Receivable

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