e.
PROBLEM 14.2
A
NELSON, INC. (concluded)
Favorable and unfavorable trends:
Favorable trends. One favorable trend is the $360,000 increase in net sales, which represented
an increase of about 14% over the prior year. A second favorable trend is the decrease in
more than offsets the increase in net sales and the reduction in operating expenses, and
accounts for the declines in income before income taxes and in net income. As it appears that
the company’s problems in 2015 stem from the higher cost of merchandise being purchased
from the new supplier, management should consider either raising its selling prices or looking
for a less costly source of supply.
15 Minutes, Easy
a. Current assets:
Cash 69,400$
Marketable securitie
s
175,040
b. The current ratio is 2.86 to 1. It is computed by dividing the current assets of $659,080 by the
current liabilities of $230,270. The amount of working capital is $428,810, computed by
PROBLEM 14.3
A
ROGAND GROCERY, INC.
25 Minutes, Easy
THE KROGER COMPANY, INC.
(Dollars in
Millions)
a. Current assets:
Cash 1,193$
Receivable
s
1,051
Merchandise inventorie
s
5,146
Other current assets 569
Total current assets 7,959
$
$
$
PROBLEM 14.4
A
s
c.
d.
PROBLEM 14.4
A
THE KROGER COMPANY, INC. (concluded)
No. It is difficult to draw conclusions from only the above ratios. Kroger’s current ratio is
Due to characteristics of the industry, supermarkets tend to have smaller amounts of current
assets and quick assets than other types of merchandising companies. An inventory of food has
a short shelf life. Therefore, the inventory of a supermarket usually represents only a few
35 Minutes, Medium
(Dollars in
Thousands)
a. (1) Quick assets:
Cash 50,230$
(2) Current assets:
Cash 50,230$
5
(3) Current liabilities:
Notes payable to banks (due within one year) 20,000$
Accounts payable 5,912
(2) Current ratio:
Current assets (part a) 167,65
5
$
(3) Working capital:
Current assets (part a) 167,65
5
$
(4) Debt ratio:
Total liabilities (given) 81,630$
6
Debt ratio ($81,630 ÷ $353,816) 23.1
%
PROBLEM 14.5
A
SWEET TOOTH, INC.
c. (1)
(2)
PROBLEM 14.5
A
SWEET TOOTH, INC. (concluded)
From the viewpoint of short-term creditors, Sweet Tooth appears highly liquid. Its quick
and current ratios are well above normal rules of thumb, and the company’s cash and
marketable securities alone are almost twice its current liabilities.
Long-term creditors should feel relatively secure. Not only is the company highly liquid,
45 Minutes, Strong
b. (1) Current ratio:
Current assets:
Cash 30,000$
Accounts receivable 150,000
Inventory 200,000
Total current assets 380,000
$
Current liabilities 150,000$
Current ratio ($380,000 ÷ $150,000) 2.5 to 1
(2) Quick ratio:
Quick assets:
(3) Working capital:
$
(4) Debt ratio:
Total liabilities
Total assets 1,000,000$
Less: Total stockholders’ equity 300,000
$
PROBLEM 14.6
A
DICKSON, INC
Parts a, c, e, and f appear on the following page.
a.
PROBLEM 14.6
A
DICKSON, INC. (concluded)
In the statement of cash flows, amounts are reported on a cash basis, whereas in the income
statement, they are reported under the accrual basis. Apparently, $5,000 of the interest
expense incurred during the year had not been paid as of year-end. This amount should be
included among the accrued expenses appearing as a current liability in the company’s
balance sheet.
25 Minutes, Medium
($
i
n
Milli
ons
)
a. Current ratio:
(
1
)
Be
g
innin
g
of
y
ear
(
$9,150 ÷ $4,726
)
1.94 to 1
(
2
)
End of
y
ear
(
$9,515 ÷ 5,857
)
1.62 to 1
(
)
g
g
y
(
(
)
y
(
(
)
(
)
]
PROBLEM 14.7
A
MEDTRONICS
g
25 Minutes, Medium
a. (1) Inventory turnover:
PROBLEM 14.8
A
HARRISON ELECTRONICS, INC.