Question

- Which of the following ratios is given highest significance by CFAs (Investment analysts & managers)?

a. |
Current Ratio and Accounts Receivable Turnover in days |

b. |
Quick Ratio and Fixed Charge Coverage |

c. |
Return on Equity after tax and Price/Earnings ratio |

d. |
Inventory Turnover and Times Interest Earned |

Answer #1

a. |
Current Ratio and Accounts Receivable Turnover in days |

The current ratio and the accounts receivable turnover in days is given the highest significance by the CFAs. Both are liquidity ratios. The current ratio measures the short term liquidity profile of the company and is defined as current asset to the current liabilities. The account receivable turnover, on the other hand, is defined as the net credit sales to the average accounts receivables.

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

Q9 to Q12- Write the formula for the following ratios and what
each ratio measures:
Return on equity (ROE)
Return on assets (ROA)
Gross profit
Gross margin
Profit margin (also called the “net profit margin”)
Asset turnover
Fixed-Asset Turnover
Inventory Turnover
Inventory Period (also called “days inventory
outstanding”)
Collection Period (also called “account receivable
period”)
Payables Period (also called “account payable period”)
Operating Cycle
Cash Conversion Cycle
Financial Leverage (also called “equity multiplier” )
Debt-to-assets ratio
Debt-to-equity ratio
Times interest...

Give a short explanation of your conclusions about Barnes and
Noble after each category of ratios (i.e. How liquid is the
company? How efficiently is it using its assets? etc.).
Liquidity and Efficiency
Current Ratio
= Current assets / Current liabilities
1.45
Acid-test ratio
= Cash + Short-term investments + Current receivables / Current
liabilities
0.27
Accounts receivable turnover
= Net sales / Average accounts receivable, net
20.52
times
Inventory turnover
= Cost of goods sold / Average inventory
6.45...

Fader Corp.’s 2014 and 2015 SFP and 2015 SCI are as follows (in
millions of dollars, except per share amounts):
Condensed Statement of Financial Position
31 December
2015
2014
ASSETS
Cash
$
13
$
24
Investments (short-term)
4
7
Accounts receivable (net of allowance)
25
22
Inventory (FIFO)
39
47
Prepaid expenses
5
3
Investments, long-term
54
54
Property, plant, and equipment (net of accumulated
depreciation of $29 (2014), $37 (2015))
92
82
Total assets
$
232
$
239
LIABILITIES...

Industry
Lululime Ltd. Ratios
2020
2020
2019
2018
Profit margin
5.81%
5.5%
5.62%
6.25%
Return on assets
8.48%
6.34%
7.79%
9.38%
Return on equity
10.10%
14.24%
15.72%
17.05%
Receivable turnover
9.31 ×
6.54x
7.8x
10x
Average collection period
35.6 days
55.8 days
46.7 days
36.5 days
Inventory turnover
5.84 ×
4x
3.9x
3.8x
Capital asset turnover
2.20 ×
1.84x
2.5x
2.72x
Total asset turnover
1.46 ×
1.14x
2.5x
1.5x
Current ratio
2.15 ×
1.45x
1.78x
2.25x
Quick ratio
1.10 ×...

TRUE/FALSE
Simply calculating the various ratios tells everything you need
to know about a company.
You would expect a produce market to have a low inventory
turnover ratio.
The Acid Test Ratio uses only the most liquid current assets in
its calculation.
The Current Ratio uses only the most liquid current assets in
its calculation.
The Inventory Turnover Ratio indicates the number of times
Accounts Receivable are turned into cash during the period.
The Return on Sales Ratio indicates how...

Current Ratio= 2.33
Operating Profit Margin= 2.3%
Quick Ratio= 0.8488
Total Debt to Equity= 1.21
Inventory Turnover= 4.12
Return on Assets= 1%
Average Collection Period= 37.79 days
Return on Equity= 2.22%
Total Assets Turnover= 2.31
TIE= 1.46
Select two of the ratios you derived in Corrigan Corporation.
Without re-stating the formula itself, explain what the ratio means
in terms of the corporation’s financial health. The industry norms
are provided below to use as comparative information. Points will
be awarded based...

Explain the kind of information the following financial ratios
provide about a firm. Hand-write all responses. a. Quick ratio - b.
Cash ratio c. Total asset turnover d. Equity multiplier e.
Long-term debt ratio f. Times interest earned g. Profit margin h.
Return on assets i. Return on equity j. Price-earnings

Some recent financial statements
for Smolira Golf Corp. follow.
SMOLIRA GOLF
2011 and 2012 Balance Sheets
Assets
Liabilities and Owners’ Equity
2011
2012
2011
2012
Current assets
Current
liabilities
Cash
$
23,066
$
25,300
Accounts payable
$
24,384
$
28,300
Accounts receivable
13,648
16,400
Notes payable
14,000
12,000
Inventory
27,152
28,300
Other
12,771
19,700
Total
$
63,866
$
70,000
Total
$
51,155
$
60,000
Long-term debt
$
81,000
$
90,000
Owners’ equity
Common stock and paid-in
surplus
$
55,000...

BA233 -
Accounting for Managers
M6 Step 1 Learning
Activity
Silver Computer
Corporation
Use the financial statements
below to complete a financial ratio analysis.
The ratios should be
calculated on the ratio worksheet. Make sure to reference
amounts from the statements
onto your ratios. Be sure that your answer
uses the correct format for
that ratio: times, percentage, days, dollar amount.
Ratio
Format:
Show with your answer whether
the ratio is times, perentage, or dollar amount.
For example:
o
Current...

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