Chapter 14 Financial Statement Analysis Compute the following: a. Current ratio.

Question

Chapter 14 Financial Statement Analysis Compute the following: a. Current ratio. b. Quick ratio. c. Working capital. d. Debt ratio. e. Accounts receivable turnover (all sales were on credit). f. Inventory turnover & Book value per share of capital stock U EXERCISE 14.13 Selected items from successive annual reports of Carey, Inc., appear as follows: Current Ratio, Debt 2011 2010 $400,000 $325 $ 80,000 $100,000 100,000 50,000 100,000 100,000 120,00075,000 , Ratio, and Earnings 107 per Share Total assets (40% of which are current) Current liabilities Bonds payable, 12% Capital stock, $5 par value Retained earnings Total liabilities & stockholders' equity $400,000 $32500 Dividends of $16,000 were declared and paid in 2011. Compute the following: a. Current ratio for 2011 and 2010. b. Debt ratio for 2011 and 2010. c. Earnings per share for 2011. L07 EXERCISE 14.14 Selected data from the financial statements of Italian Marble Co. and Brazil Stone Products for the Ratio Analysis for Two year just ended follow. Assume that for both companies dividends declared were equal in amount Similar Companies to net earnings during the year and therefore stockholders' equity did not change. The two com nies are in the same line of business. Italian Brazil Stone Marble Co. Products Total liabilities Total assets 200,000 100,000 800,000 400,000 1,800,000 1200,000 240,000 140,000 ..200,000 100,000 Average inventory. .. Average receivables Operating expenses as a percentage of sales Net income as a percentage of sales 40% 36% 396 30% 25% 5% Compute the following for each company and state a brief conclusion about which in the stronger financial position. a. Net income. b. Net income as a percentage of stockholders c. Accounts receivable turnover. d. Inventory turnover equity

Explanation / Answer

a) Current ratio=Current assets/Current liabilities 2011 2010 1) Current assets 160000 130000 (400000*40%) (325000*40%) 2) Current liabilities 80000 100000 3) Current ratio (1/2) 2.00 1.30

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