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13-24
Problem 13-24B
= 1.96:1
c. Accounts receivables turnover = Net sales ÷ Average A/R
d. Cost of goods sold ÷ Average inventory
13-25
ATC 13-1
years:
1. Current ratio
2. Average days to sell inventory (Use average inventory.)
1st, compute average inventory:
Costco: ($ 7,096+ $ 6,638) ÷ 2 = $ 6,867
3. Debt to assets ratio
4. Return on investment (Use average assets and use “earnings from
continuing operations – before taxes” rather than “net earnings.”)
5. Gross margin percentage
13-26
13-27
ATC 13-1 (continued)
6. Asset turnover (Use average assets.)
7. Return on sales (Use “earnings from continuing operations-before
8. Plant assets to long-term debt ratio
Costco: $ 12,961 ÷ $ 2,362 = 5.5 to 1
Wal-Mart: $112,324 ÷ $55,345 = 2.0 to 1
b. The ratios above that are most relevant to determining profitability
are:
Return on investment (Wal-Mart is better.)
13-28
Average days to sell inventory (Costco is better.)
ATC 13-2
The correct matching of the four companies with their related financial
data can be achieved primarily with the gross margin percentage ratio,
plus other factors. However, on the assumption that many students will
RATIO:
A
B
C
D
54.7% =
77.6% =
25.6% =
44.8% =
Gross Margin
$ 69,349
$52,340
$ 7,547
$2,940
$ 126,723
$67,425
$29,466
$6,568
3.1% =
14.8% =
9.5% =
7.5% =
Return-on-Sales
$ 3,944
$10,009
$ 2,800
$ 491
$126,723
$67,425
$29,466
$6,568
1.5% =
5.3% =
5.8% =
9.9% =
Return-on-Assets
$ 3,944
$ 10,009
$ 2,800
$ 491
$270,344
$188,002
$48,207
$4,954
13-29
ATC 13-2 (continued)
The four companies relate to the financial information as follows:
AT&T is company “A”
Pfizer is company “B”
Deere & Co. is company “C”
13-30
ATC 13-3
a.
2011
2007
Sales
$39,046
$14.430
- Cost of goods sold
16,634
5,936
Gross margin
22,412
8,494
÷ Sales
39,046
14.430
= Gross margin
57.4%
58.9%
2011
2007
Net earnings
$ 7,959
$ 3,048
÷ Sales
39,046
14.430
= Net margin
20.4%
21.1%
2011
2007
Net earnings
$ 7,959
$ 3,048
÷ Assets
112,427
28,699
= Return on investment
7.1%
10.6%
2011
2007
Net earnings
$ 7,959
$ 3,048
÷ Total stockholders'
equity
41,044
14,910
= Return on equity
19.4%
20.4%
13-31
ATC 13-3 (continued)
2011
2007
Current assets
$12,323
$5,539
÷ Current liabilities
19,644
6,685
= Current ratio
0.63
0.83
2011
2007
Compute total liabilities:
Total liabilities &
stockholders' equity
$112,427
$28,699
- Total stockholders'
equity
41,044
14,910
= Total liabilities
$71,383
$13,789
Total liabilities
$ 71,383
$13,789
÷ Total assets
112,427
28,699
= Debt to assets ratio
0.63
0.48
b. All of the ratios were worse in 2011 than they were in 2007, although
c. InBev’s performance has obviously declined during the three years since it
merged with Anheuser-Busch, but the declines could be due to factors other
13-32
ATC 13-4
The companies and the set of ratios to which each relates are as follows:
Caterpillar Company 4
Denny’s Company 2
Molson Coors (M-C) Company 3
Weight Watchers International (W-W) Company 1
receivables. Given a choice among M-C, Caterpillar, and W-W, most
students will probably determine that Caterpillar is the most likely to have
such long inventory and receivables collection periods. It makes sense
that customers will take longer to pay for heavy equipment than for beer or
weight-loss products. Company 4 also has the second lowest assets
13-33
ATC 13-5
a. Writing off the trucks would make the asset base smaller and
thereby cause the return on assets ratio to be higher.
(1) avoid actual or apparent conflicts of interest and advise all
appropriate parties of any potential conflict, (2) refrain from
engaging in any activity that would prejudice their ability to carry out
their duties ethically, (3) refrain from either actively or passively
subverting the attainment of the organization’s legitimate and ethical
13-34
ATC 13-6
Screen capture of cell values
13-35
ATC 13-6
Screen capture of cell formulas
13-36
ATC 13-7
13-37
ATC 13-7
Screen capture of cell formulas
