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Title: Exercise 17-7
QA_Ori:
Simon Company
Common-Size Comparative Balance Sheets
December 31, 2012-2014
At December 31 2014 2013*2012
Assets
Cash.................................................................... 6.1% 8.0% 10.0%
Liabilities and Equity
Accounts payable................................................ 24.8% 16.9% 13.6%
* Column does not equal 100.0 due to rounding.
Analysis: Several observations can be made.
(2) Accounts receivable have increased as a percent of assets—this may be
(3) Plant assets have declined as a percent of assets—this is favorable if the company
Title: Exercise 17-8
QA_Ori:
1. Current ratio
Analysis and Interpretation: Simon's short-term liquidity position has deteriorated
over this three-year period. Both the current and acid-test ratios show declining
QA_Edit:
Title: Exercise 17-9
QA_Ori:
1. Days' sales uncollected
2. Accounts receivable turnover
3. Inventory turnover
4. Days’ sales in inventory
Analysis and Interpretation: The number of days' sales uncollected has
increased and the accounts receivable turnover has declined. Also, the inventory
turnover has decreased and days’ sales in inventory has increased. While none
of these changes in ratios that occurred from 2013 to 2014 appear dramatic, it
seems that Simon is becoming less efficient in managing its inventory and in
collecting its receivables.
$89,500
$532,000
$673,500
($62,500 + $50,200)/2
$411,225
($82,500 + $54,000)/2
$112,500
$345,500
Title: Exercise 17-10
QA_Ori:
1. Debt and equity ratios
2014 2013
Total liabilities and debt ratio
$129,900 + $98,500.......................$228,400 43.7%
2. Debt-to-equity ratio
3. Times interest earned
Analysis and Interpretation: Simon added debt to its capital structure during
Title: Exercise 17-11
QA_Ori:
1. Profit margin
2. Price-earnings ratio, December 31
3. Dividend yield
Analysis and interpretation
The company’s return on common stockholders’ equity is good, but not great.
The dividend yield is on the low side. Thus, this stock would likely be
QA_Edit:
Title: Exercise 17-13A
QA_Ori:
1. A Income (loss) from continuing operations
2. C Extraordinary gain (loss)
Title: Exercise 17-14
QA_Ori:
RANDA MERCHANDISING, INC.
Income Statement
For Year Ended December 31, 2013
Net sales.......................................................................... $2,900,000
Expenses
Income taxes expense..................................................... 217,000
Income from continuing operations.................................. 330,500
Discontinued segment
Title: Exercise 17-15
QA_Ori:
2. The results in part 1 reveal that ratios can help us overcome differences
QA_Edit:
Title: Problem 17-1A
QA_Ori:
Part 1
Current ratio: December 31, 2014: $52,390 / $22,800 = 2.3 to 1
Part 2
KORBIN COMPANY
Common-Size Comparative Income Statements
For Years Ended December 31, 2014, 2013, and 2012
2014 2013 2012
Sales............................................................100.00% 100.00% 100.00%
Administrative expenses.............................. 9.13 8.80 8.20
Part 3
KORBIN COMPANY
Balance Sheet Data in Trend Percents
December 31, 2014, 2013, and 2012
2014 2013 2012
Assets
Current assets.................................... 101.24% 73.29% 100.00%
Liabilities and Equity
Current liabilities................................. 112.32% 98.33% 100.00%
Part 4
Significant relations revealed
Korbin’s selling expenses and income taxes consumed smaller portions of each
Korbin expanded its plant assets in 2013, financing the expansion through the sale
of long-term investments, through a reduction in working capital (the current ratio
