ACC 205 Week 5 Exercise Assignment Financial Ratios New

1. 1.      Liquidity ratios. Edison, Stagg, and Thornton have the following financial information at the close of business on July 10:

	Edison	Stagg	Thornton
Cash	$4,000	$2,500	$1,000
Short-term investments	3,000	2,500	2,000
Accounts receivable	2,000	2,500	3,000
Inventory	1,000	2,500	4,000
Prepaid expenses	800	800	800
Accounts payable	200	200	200
Notes payable: short-term	3,100	3,100	3,100
Accrued payables	300	300	300
Long-term liabilities	3,800	3,800	3,800

1. Compute the current and quick ratios for each of the three companies. (Round calculations to two decimal places.) Which firm is the most liquid? Why?


2. Suppose Thornton is using FIFO for inventory valuation and Edison is using LIFO. Comment on the comparability of information between these two companies.


3. If all short-term notes payable are due on July 11 at 8 a.m., comment on each company’s ability to settle its obligation in a timely manner.

1. 2.      Computation and evaluation of activity ratios. The following data relate to Alaska Products, Inc:

	19X5	19X4
Net credit sales	$832,000	$760,000
Cost of goods sold	440,000	350,000
Cash, Dec. 31	125,000	110,000
Accounts receivable, Dec. 31	180,000	140,000
Inventory, Dec. 31	70,000	50,000
Accounts payable, Dec. 31	115,000	108,000

The company is planning to borrow $300,000 via a 90-day bank loan to cover short-term operating needs.

1. Compute the accounts receivable and inventory turnover ratios for 19X5. Alaska rounds all calculations to two decimal places.


2. Study the ratios from part (a) and comment on the company’s ability to repay a bank loan in 90 days.


3. Suppose that Alaska’s major line of business involves the processing and distribution of fresh and frozen fish throughout the United States. Do you have any concerns about the company’s inventory turnover ratio? Briefly discuss.

1. 3.      Profitability ratios, trading on the equity. Digital Relay has both preferred and common stock outstanding. The com­pany reported the following information for 19X7:

Net sales	$1,500,000
Interest expense	120,000
Income tax expense	80,000
Preferred dividends	25,000
Net income	130,000
Average assets	1,100,000
Average common stockholders’ equity	400,000

1. Compute the profit margin on sales and the rates of return on assets and common stockholders’ equity, rounding calculations to two decimal places.


2. Does the firm have positive or negative financial leverage? Briefly ex­plain.

1. 4.      Financial statement construction via ratios. Incomplete financial statements of Lock Box, Inc., are presented below.

LOCK BOX, INC. Income Statement For the Year Ended December 31, 19X3
Sales	$ ?
Cost of goods sold	?
Gross profit	$15,000,000
Operating expenses & interest	?
Income before tax	$ ?
Income taxes, 40%	?
Net income	$ ?

LOCK BOX, INC. Balance Sheet December 31, 19X3
Assets
Cash Accounts receivable Inventory Property, plant, &. equipment Total assets	$ ? ? ? 8,000,000 $24,000,000
Liabilities & Stockholders’ Equity
Accounts payable Notes payable (short-term) Bonds payable Common stock Retained earnings Total liabilities & stockholders’ equity	$ ? 600,000 4,600,000 2,000,000 ? $24,000,000

Further information:

1. Cost of goods sold is 60% of sales. All sales are on account.


2. The company’s beginning inventory is $5 million; inventory turnover is 4.


3. The debt to total assets ratio is 70%.


4. The profit margin on sales is 6%.


5. The firm’s accounts receivable turnover is 5. Receivables increased by $400,000 during the year.

Instructions:

Using the preceding data, complete the income statement and the balance sheet.

Home Work Hour aims to provide quality study notes and tutorials to the students of ACC 205 Week 5 Exercise Assignment Financial Ratios New in order to ace their studies.

ACC 205 Week 5 Exercise Assignment Financial Ratios New

ACC 205 Week 5 Exercise Assignment Financial Ratios New

http://www.homeworkhour.com/

ACC 205 Week 5 Exercise Assignment Financial Ratios New, Home Work Tutorials, Home Work Solutions, Home Work Essay, Home Work Questions.ACC 565 Wk 7 Assignment 3, ACC403 week 2 assignment, ACC565 Week 10, ACCT 212 (Financial Accounting),  ACCT 344 (Entire Course) – Devry, ACCT 344 Final Exam Latest 2014 – Devry,  ACCT 346 (Managerial Accounting), ACCT 346 Midterm Exam Updated DeVry, ACCT 504, ACCT 504 Week 8, ACCT 553, ART 101 Week 8, Ashford BUS 401, ASHFORD BUS 640, Ashford HIS 204, ASHFORD MAT 222 Week 3, BA 215 (Business Statistics), BA 215 All Assignments Week 1 -8 – Grantham, BA 225, BA 260, BA 265 (Business Law II), BA 265 (Business Law II) FINAL EXAM, BA 340 All Course Assignments, BA 340 Human Resource, BA 370 (Employment Law), BA 405 Multinational Management, BA 470 Week 3 – 5 – 6 – 7, BA 470 Entrepreneurship, BA350 Principles Of Finance, BIS 155 Final Exam – DeVry, BIS 220 Final Exam, BSOP 429, BSOP 434 Entire Course – Devry, BUS 303 Week 2, BUS 303 Week 3, BUS 303 Week 5, BUS 311 Business Law, BUS 330 Week 1, BUS 330 Week 3, BUS 330 Week 5, BUS 401 Week 4 DQ 1, BUS 401 Week 4 DQ 2, BUS 402 WEEK 4, BUS 405 (Principles of Investment), BUS 475, BUS 475 Final Exam 100 MCQS, BUS 475 Final Exam 600 MCQS, BUS 599 (STRAYER), BUS 599 Assignment, BUS 620 Week 4, BUS 640 Week 1, BUS499 Asignment 4, BUS508 Asignment 1, BUS499 Assignment 3

ACC 205 Week 5 Exercise Assignment Financial Ratios New