Question

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

Answer #1

Liquidity ratios tells us how the company financial position would be in near future. whether in near future company would be able to meet its current liabilities.liquidity Ratios include Current Ratio and Quick Ratio Working Capital Ratio.

Solvency Ratio Include the financial Ratios which tells the company financial position in long run. It tells whether in coming future (1 year) company would be able to meet its future obligations and liabilities. Basically Liquidity Ratios are for short term and solvency ratios are for long term.

Interest coverage Ratios tells us whether the company profits are sufficient to pay the interest expense that the company is incurring.

Class, here’s a great opportunity for a peer response. Take a
look at the ratios below. Select a category and examine how these
ratios might be useful to an external financial statement user:
Profitability Ratios Gross Profit Rate = Gross Profit / Sales
Return on Equity = Net Income / Average Common Stockholders’ Equity
Return on Sales = Net Income / Sales Earnings per Share = (Net
Income – Preferred Dividends) / Average Common Shares of Stock
Outstanding Market Price...

Compute and Interpret Liquidity, Solvency and Coverage
Ratios
Selected balance sheet and income statement information for Calpine
Corporation for 2004 and 2006 follows.
($ millions)
2004
2006
Cash
$ 1,256.73
$ 1,523.36
Accounts receivable
1,097.16
735.30
Current assets
3,313.56
3,268.33
Current liabilities
3,285.39
6,057.95
Long-term debt
17,150.81
3,531.63
Short-term debt
1,033.96
4,568.83
Total liabilities
22,898.42
25,503.17
Interest expense
1,516.90
1,288.29
Capital expenditures
1,545.48
211.50
Equity
4,587.67
(7,152.90)
Cash from operations
19.89
335.98
Earnings before interest and taxes
1,659.84
1,907.84
(a)...

Compute and Interpret Liquidity, Solvency and Coverage
Ratios
Selected balance sheet and income statement information from
Verizon Communications Inc. follows.
($ millions)
2016
2015
Current assets
$ 26,395
$ 22,355
Current liabilities
30,340
35,052
Total debt
108,078
109,729
Total liabilities
220,148
226,333
Equity
24,032
17,842
Earnings before interest and taxes
27,059
33,060
Interest expense
4,376
4,920
Net cash flow from operating activities
$ 22,715
$ 38,930
Round all your answers to two decimal places.
(a) Compute the current ratio for...

For each of the following financial statement ratios, identify
whether the ratio provides analysis regarding a firms:
Profitability
Liquidity
Solvency
Common stockholder valuation
Earnings Per Share (EPS)
Quick ratio
Gross profit percentage (or margin)
Dividend Yield
Price to Earnings ratio
Accounts receivable turnover
Operating cash flow to current liabilities ratio
Days' sales in inventory
Debt to Equity ratio
Return on sales
Return on assets
Current ratio

Go to the Internet and find the following ratios for
McDonald Corporation (MCD). Give the source of your
information.
Ratio
Formula
Calculation
Ratio
Liquidity
Current
total current assets / total current liabilities
Quick, or Acid Test
(current assets - inventories) / current liabilities
Asset Management
Inventory Turnover
cost of goods sold / Inventories (average)
Days sales outstanding
Receivables / Sales per day
Fixed assets turnover
Annual sales / Net Fixed assets (average)
Total assets turnover
Annual sales / total assets...

Compute and Interpret Liquidity and Solvency
Ratios
Selected balance sheet and income statement information from
Comcast Corporation for 2015 and 2014 follows ($ millions).
Total Current Assets
Total Current Liabilities
Income Before Interest and Taxes
Interest Expense
Total Liabilities*
Stockholders' Equity
*Includes redeemable noncontrolling interests
2015
$12,653
$18,178
$16,023
$2,702
$112,596
$54,828
2014
13,881
17,410
15,351
2,617
106,118
53,918
a. Compute the current ratio for each year.
Round answers to two decimal places.
Current Ratio
2015
Answer
2014
Answer
b....

Compute and Interpret Liquidity and Solvency Ratios
Selected balance sheet and income statement information from
Comcast Corporation for 2015 and 2014 follows ($ millions).
Total Current Assets
Total Current Liabilities
Income Before Interest and
Taxes
Interest Expense
Total Liabilities*
Stockholders' Equity
*Includes redeemable noncontrolling interests
2015
$12,453
$18,178
$15,823
$2,702
$112,596
$54,578
2014
13,681
17,410
15,151
2,617
106,118
53,668
a. Compute the current ratio for each year.
Round answers to two decimal places.
Current Ratio
2015
Answer
2014
Answer
b....

Compute and Interpret Liquidity and Solvency Ratios Selected
balance sheet and income statement information from Comcast
Corporation for 2015 and 2014 follows ($ millions). Total Current
Assets Total Current Liabilities Income Before Interest and Taxes
Interest Expense Total Liabilities* Stockholders' Equity 2015
$12,303 $18,178 $15,673 $2,702 $112,596 $53,978 2014 13,531 17,410
15,001 2,617 106,118 53,068 *Includes redeemable noncontrolling
interests a. Compute the current ratio for each year. Round answers
to two decimal places. Current Ratio 2015 2014 b. Compute times...

Below is selected balance sheet and income statement
information from Scott & Company.
(in millions)
2014
2012
Cash
$ 1,483.36
$ 1,536.73
Accounts receivable
735.30
1,097.16
Current assets
2,918.33
3,913.56
Current liabilities
6,157.95
3,385.39
Long-term debt
3,611.63
17,620.81
Short-term debt
4,568.83
1,033.96
Total liabilities
26,363.17
23,218.42
Interest expense
1,338.29
1,566.90
Capital expenditures
211.50
1,545.48
Equity
-7,152.90
4,587.67
Cash from operations
185.98
110.89
Earnings before interest and taxes
1,902.84
1,594.84
a. Compute the following liquidity, solvency and coverage ratios
for both...

Financial? ratios: Liquidity.??The financial statements
for Tyler? Toys, Inc. are shown in the table below.
Calculate the current? ratio, quick? ratio, and cash ratio for
Tyler Toys for 2013 and 2014. Should any of these ratios or the
change in a ratio warrant concern for the managers of Tyler Toys or
the? shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,146,314
$13,566,585
Cost of goods sold
$-8,448,624
$-8,132,222
Selling, general, and...

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