Problem 13-23A Financial statements for Pocca Company follow. (See Excel) Use the financial statements for Pocca Company from Problem 13-22A to calculate the following ratios for 2006 and 2005. Working capital Current ratio Quick ratio Accounts receivable turnover (beginning receivables at January 1, 2005, were $47,000.) Average number of days to collect accounts receivable Inventory turnover (beginning inventory at January 1, 2005, was $140,000.) Average number of days to sell inventory Debt to assets ratio Debt to equity ratio Times interest earned Plant assets to long-term debt Net margin Asset turnover Return on investment Return on equity Earnings per share Book value per share of common stock Price-earnings ratio
E 21–4: Summary entries for cash received from customers LO21–3 For each of the three independent situations below, prepare journal entries that summarize the selling and collection activities for the reporting period in order to determine the amount of cash received from customers and to explain the change in each account shown. All dollars are in millions. Situation 1 Sales | $200 | Received on account | $0 | Cash received | $200 | Summary Entry 1 Description | Debit | Credit | Cash | $200 | | Sales Revenue | | $200 | Situation 2 Sales | $200 | Received on account | $10 | Cash received | $190 | Summary Entry 2 Description | Debit | Credit | Cash (received from customers) | $190 | |
DSO = Receivables / Ave. sales per day Receivables= DSO * Ave. sales per day = 20 * 20,000 Receivables= $400,000 (3-2) Debt Ratio: Vigo Vacations has an equity multiplier of 2.5. The company’s assets are financed with some combination of long-term debt and common equity. What is the company’s debt ratio? Debt ratio = 1 – (1 / Equity multiplier) Debt ratio = 1 – (1/2.5) = 1 - .40 = .60 Debt ratio = 60% (3-3) Market/Book Ratio: Winston Washers’s stock price is $75 per share. Winston has $10 billion in total assets.
J. Premium offers outstanding- Current Liability K. Discount notes payable- Current Liability L. Employee payroll deductions unremitted- Current Liability M. Current maturities of long-term debts to be paid from current assets- Current Liability N. Cash dividends declared but unpaid- Current Liability O. Dividends in arrears on preferred stock- Footnote disclosure P. Loans from officers- Current Liability 13-2. Accounts and Notes Payable * The following are selected 2012 transactions of Darby Corporation. Sept. 1 | Purchased inventory from Orion Company on account for $50,000.
Inventory turnover 56,534,254 / 8,517,203 = 6.6 * Profitability ratios 5. Asset turnover $56,534,254 / 34,825,498 = 1.6 times 6. Profit margin $2,430,872 / 56,534,254 = 4.3 7. Return on assets $2,430,872 / 34,825,498 = 6.9 8. Return on common stockholders’ equity $29,946,992 - (2430872-15801332) / 200,000 = 82.9% * Solvency ratios 9.
3.1.10 Cash Budget The cash budget is “an estimation of the cash inflows and outflows for a business for a specific period of time. Cash budget are used to assess whether the entity has sufficient cash to fulfil regular operations and whether too much cash is being left in unproductive capacities”. (Reference 2) The cash budget is prepared in advance for the first 6 months, and a cash deficit of £20,364 and £2,228 were incurred in January and February. A second-hand bottling plant was purchased in January which cost £420,000. The business required £30,000 cash for working capital.
Cash flow per share= $3.00 Price /cash flow ratio= 8.0 8.0 x 3.00 = $24.00 $24.00 / $1.50 = 16 (P/E) 3-5 ROE $100millions (sales) x 3% (profit margin) = $30 million (Net income) Net Income/assets= ROE $30 millions/$50 millions (total assets) = 6% 6% x 2.0 (equity multiplier) = 12% (ROE) 3-6 Du Pont Analysis ROA=10% Profit margin= 2% ROE= 15% ROA x Equity Multiplier= ROE (Profit Margin) (Total asset turnover)= ROA 10/2=5 (this is the firm’s total asset turnover) 15/10=1.5 (this is the firm’s equity multiplier) 3-7 Current and Quick Ratios Current assets= $3 million Current ratio= 1.5 Quick ratio= 1.0 Current assets/ Current liability= current ratio $3million/1.5= $2 million (level of current liability) Current Assets - Current Liability= Inventory $3millions – $2 millions = $1 million (level of
BRIEF EXERCISE 19-8 Income before income taxes $195,000 Income tax expense Current $48,000 Deferred 30,000 78,000 Net income $117,000 BRIEF EXERCISE 19-10 Year | Future taxable amount | X | Tax Rate | = | Deferred tax liability | 2013 | $ 42,000 | 34% | $ 14,280 | 2014 | 244,000 | 34% | 82,960 | 2015 | 294,000 | 40% | 117,600 | | | | $214,840 | BRIEF EXERCISE 19-14 Income Tax Refund Receivable ($350,000 X. 40) 140,000 Benefit Due to Loss Carryback 140,000 Deferred Tax Asset ($500,000 – $350,000) X .40 60,000 Benefit Due to Loss Carryforward 60,000 Benefit Due to Loss Carryforward 60,000 Allowance to Reduce Deferred
Prepare Gate's general journal entry to record the issuance of the note payable. b. Prepare Gate's general journal entry to record the accrued interest due at December 31, 2007. c. Prepare Gate's general journal entry to record the payment of the note on March 1, 2008. Answer: a. | 12/1/07 | Cash | 45,000 |
Liquidity Ratio Calculations: Current Ratio = Current Assets / Current Liabilities $147,800 / $90,283 = $1.637:1 Acid-Test Ratio = (Cash + Short-Term Investments + Net Receivables) / Current Liabilities $89,664 + $0 + $51,869 / $90,283 = $1.567:1 Receivables Turnover = Net Credit Sales / Average Receivables ($1,109,295 - $89,664) / [($51,869 + $81,557) / 2] = 15.283 *Average Collection Period = 365 / 15.283 = 23.883 Days When evaluating Huffman Trucking’s ability to pay off short-term debt and maturing obligations, it’s imperative to analyze the company’s liquidity. Utilizing the current ratio to analyze liquidity, which compares all current assets to current liabilities,