60. The ratio that reflects the mix of sources of financing for a company is the
61. When analyzing a company’s debt-to-equity ratio, if the ratio has a value that is greater then one, then the
company has
62. When analyzing a company’s debt-to-equity ratio, if the ratio has a value that is equal to one, then the
company has
63. When analyzing a company’s debt ratio, if the ratio has a value that is equal to one, then the company has
64. When analyzing a company’s assets-to-equity ratio, if the ratio has a value that is equal to one, then the
company has
65. The ratio that indicates if a borrowing company will be able to meet its required interest payments is the
66. Exhibit 14-6
The following data came from the financial statements of Petrini Company:
Total assets
$205,000
Total liabilities
95,000
Total stockholders’ equity
110,000
Operating profit
60,000
Interest expense
500
Refer to Exhibit 14-6. Given the information above, compute the debt-to-equity ratio (rounded to two decimal places) for Petrini Company.
67. Exhibit 14-6
The following data came from the financial statements of Petrini Company:
Total assets
$205,000
Total liabilities
95,000
Total stockholders’ equity
110,000
Operating profit
60,000
Interest expense
500
Refer to Exhibit 14-6. Given the information above, compute the debt ratio (rounded to two decimal places) for Petrini Company.
68. Exhibit 14-6
The following data came from the financial statements of Petrini Company:
Total assets
$205,000
Total liabilities
95,000
Total stockholders’ equity
110,000
Operating profit
60,000
Interest expense
500
Refer to Exhibit 14-6. Given the information above, compute the assets-to-equity ratio (rounded to two decimal places) for Petrini Company.
69. The following data came from the financial statements of Petrini Company:
Total assets
$205,000
Total liabilities
95,000
Total stockholders’ equity
110,000
Net income
65,000
Tax expense
4,000
Interest expense
500
Compute the times interest earned ratio (rounded to two decimal places) for Petrini Company.
70. Which of the following is NOT a situation when it would be important to analyze cash flow information
because net income is NOT giving an accurate portrayal of the economic performance of the company?
71. Which cash flow ratio reflects the extent to which accrual accounting adjustments and assumptions have
been included in net income?
72. Which cash flow ratio reflects a company’s ability to finance its capital expansion through cash from
operations?
73. In general, most companies have significant noncash expenses that reduce net income and also cause the
cash flow-to-net income ratio to be
74. The cash flow adequacy ratio is computed as
75. Exhibit 14-7
The following data came from the financial statements of the Green Company:
Cash from operations
$900,000
Cash from investing activities
350,000
Cash from financing activities
220,000
Cash paid for capital expenditures
55,000
Net income
425,000
Refer to Exhibit 14-7. Compute the cash flow adequacy ratio.
76. Exhibit 14-7
The following data came from the financial statements of the Green Company:
Cash from operations
$900,000
Cash from investing activities
350,000
Cash from financing activities
220,000
Cash paid for capital expenditures
55,000
Net income
425,000
Refer to Exhibit 14-7. Compute the cash flow-to-net income ratio.
77. The particular analytical measures chosen to analyze a company may be influenced by all BUT which one
of the following?
78. Which one of these is NOT one of the benchmarking problems that arises when analyzing financial
statements?
79. The financial statements for Kobe Corporation revealed that sales revenue was $1,581,000 and that the
following were the ending account balances:
Cash
$100,000
Accounts payable
$ 80,000
Accounts receivable
130,000
Mortgage payable
500,000
Land
200,000
Capital stock
300,000
Buildings
500,000
Retained earnings
50,000
Compute the following (round all numbers to one decimal place):
a.
b.
c.
b.
c.
80. Amherst, Inc.’s financial statements contained the following information:
Sales
$1,200,000
Owners’ equity
$300,000
Expenses
$1,140,000
Market price per share
$ 90
Number of shares outstanding
20,000
Calculate the following:
a.
b.
c.
a.
b.
c.
81. The income statement and balance sheet for Belpre Company for the year ended December 31, 2012, is
presented below:
Belpre Company
Income Statement
For the Year Ended December 31, 2012
Sales revenue
$900,000
Less: Cost of goods sold
500,000
Gross profit
$400,000
Less:
Operating expenses
Salaries expense
$150,000
Advertising expense
35,000
185,000
Net income
$215,000
Belpre Company
Balance Sheet
December 31, 2012
Assets
Current assets:
Cash
$ 165,000
Accounts receivable
75,000
Inventory
50,000
Buildings
750,000
Total assets
$1,040,000
Liabilities
Accounts payable
$ 50,000
Owners’ equity
Capital stock
$ 675,000
Retained earnings
315,000
Total owners’ equity
$ 990,000
Total liabilities and owners’ equity
$1,040,000
Using the above information, compute the following ratios (round to one decimal place).
a.
b.
c.
d.
e.
a.
$50,000 ¸ $1,040,000 = 4.8%
b.
($165,000 + $75,000 + $50,000) ¸ $50,000 = 5.8
c.
$215,000 ¸ $900,000 = 23.9%
d.
$900,000 ¸ $1,040,000 = 86.5%
e.
$215,000 ¸ $990,000 = 21.7%
82. The income statement and balance sheet for the W. Gretsky Company for the year ended December 31,
2012, is presented below:
W. Gretsky Company
Income Statement
For the Year Ended December 31, 2012
Sales revenue
$360,000
Less: Cost of goods sold
200,000
Gross profit
$160,000
Less:
Operating expenses
Salaries expense
$60,000
Advertising expense
14,000
74,000
Net income
$ 86,000
W. Gretsky Company
Balance Sheet
December 31, 2012
Assets
Current assets:
Cash
$ 66,000
Accounts receivable
30,000
Inventory
20,000
Buildings
300,000
Total assets
$416,000
Liabilities
Accounts payable
$ 20,000
Owners’ equity
Capital stock
$270,000
Retained earnings
126,000
Total owners’ equity
$396,000
Total liabilities and owners’ equity
$416,000
a.
b.
83. The income statement and balance sheet for the W. Gretsky Company for the year ended December 31,
2012, is presented below:
W. Gretsky Company
Income Statement
For the Year Ended December
31, 2012
Sales revenue
$360,000
Less: Cost of goods sold
200,000
Gross profit
$160,000
Operating expenses:
Advertising
$14,000
Salaries
60,000
74,000
Net income
$ 86,000
Sales
$360,000
100.0%
Less:
Cost of Goods Sold
200,000
55.6%
Gross Profit
$160,000
44.4%
Less:
Operating Expenses
Salaries Expense
60,000
16.7%
Advertising Expense
14,000
3.9%
Net Income
$ 86,000
23.9%
%
Cash
$ 66,000
18.3%
Accounts Receivable
30,000
8.3%
Inventory
20,000
5.6%
Buildings
300,000
83.3%
Total Assets
$416,000
115.6%
Accounts Payable
$ 20,000
5.6%
Capital Stock
$270,000
75.0%
Retained Earnings
126,000
35.0%
Total Liabilities and
Owners’ Equity
$416,000
115.6%
W. Gretsky Company
Balance Sheet
December 31, 2012
Assets
Current assets:
Cash
$ 66,000
Accounts receivable
30,000
Inventory
20,000
Total current assets
116,000
Buildings
300,000
Total assets
$416,000
Liabilities
Accounts payable
$ 20,000
Owners’ equity
Capital stock
$270,000
Retained earnings
126,000
Total owners’ equity
$396,000
Total liabilities and
owners’ equity
$416,000
Using the DuPont framework, compute (round to two decimal places):
a.
b.
c.
d.
84. The numbers below are for Jasper Company and Western Company:
Jasper
Western
Cash
$ 100
$ 600
Accounts receivable
2,500
7,000
Inventory
1,000
8,000
Property, plant, and equipment
2,400
14,400
Total assets
$ 6,000
$30,000
Total liabilities
$ 3,600
$18,000
Total equity
2,400
12,000
Sales
$10,000
$60,000
Cost of goods sold
8,000
48,000
Wage expense
500
4,500
Other expenses
1,200
5,000
Net income
300
2,500
a.
Return on sales = $86,000 ¸ $360,000 = 23.89%
b.
Asset turnover = $360,000 ¸ $416,000 = 0.87 times
c.
d.
Return on equity = $86,000 ¸ $396,000 = 21.72%
85. The financial statements of Girard Company reflect the following data:
Sales
$1,600,000
Beginning Inventory
$128,000
Cost of Goods Sold
400,000
Ending Inventory
134,000
Beginning Accounts
Beginning Property,
Receivable
672,000
Plant, and Equipment
310,400
Ending Accounts
Ending Property, Plant,
Receivable
644,000
and Equipment
312,000
Using the above information, compute the following ratios (round to two decimal places):
a.
b.
c.
d.
e.
a.
b.
c.
e.
86. List five efficiency ratios and write out the equation for each one.
Accounts receivable turnover
Sales revenue ¸ average accounts receivable
Average collection period
365 ¸ accounts receivable turnover
Inventory turnover
Cost of goods sold ¸ average inventory
Number of days’ sales in inventory
365 ¸ inventory turnover
Fixed asset turnover
Sales revenue ¸ average property, plant, and equipment
Return on Equity
Return on Sales
Asset Turnover
Jasper
12.5%
3.0%
1.7
2.5
Western
20.8%
4.2%
2.0
2.5
87. The following information is available for Escalante, Inc.:
Accounts payable
$ 525,000
Mortgage payable
950,000
Stockholders’ equity
1,275,000
Net income
35,600
Annual interest expense
1,700
Annual tax expense
2,200
Using the above information, compute the following leverage ratios (round to two decimal places).
a.
b.
88. The following information is available for Lima, Inc.:
2012
Cash
$ 7,800
Accounts receivable
195,000
Inventory
78,000
Property, plant, and equipment
187,200
Total assets
$468,000
Accounts payable
$ 35,000
Other current liabilities
70,000
Long-term debt
175,800
Stockholders’ equity
187,200
Sales
$780,000
Cost of goods sold
604,000
Interest expense
39,000
Other expenses
74,000
Tax expense
15,000
Net income
48,000
Using the above information, compute the following ratios.
a.
b.
c.
d.
a.
b.
a.
Debt-to-equity ratio: ($525,000 + 950,000) ¸ $1,275,000 = 1.16
b.
Times interest earned ratio: ($35,600 + $1,700 + $2,200) ¸ $1,700 = 23.24 times
89. Complete the following items.
a.
b.
90. Cheshire Company’s financial statements reflect the following information:
Net income
$ 97,450
Cash from operations
114,900
Cash from investing
43,200
Cash from financing
(5,700)
Cash paid for capital expenditures
32,700
Using this information, calculate the following ratios (round to two decimal places):
a.
b.
a.
b.
91. Write out the formula for each of the following ratios:
a.
Debt ratio
b.
Current ratio
c.
Return on sales
d.
Asset turnover
e.
Return on equity
f.
Price-earnings ratio
g.
Assets-to-equity ratio
h.
Cash flow-to-net income
i.
Cash flow adequacy
a.
Debt ratio
Total liabilities ¸ total assets
Debt-to-equity ratio
Total liabilities ¸ total stockholders’ equity
Assets-to-equity ratio
Total assets ¸ total stockholders’ equity
b.
Times interest earned ratio
Operating income ¸ interest expense