Even though the acid-test ratio is less than 1 which rates in the lower third quartile in the industry of 1.6, 0.9 to 0.6, it indicates a concern with repaying current liabilities. This could be due to quick expansion of inventory with the intention of increasing sales. While this is currently considered a weakness and is concerning, a rise in the ratio should be seen by 2013 due to the increase of suggested sales. 3. I calculated an “inventory turnover ratio” which measures the number of times a company sells its inventory during a year.
The total assets of Coke have risen over the years but the percent of current assets has reduced. The reduction in productive assets is a positive indication that fewer assets are required to generate increased revenues. The assets that have increased are related to other long term assets. These long term assets are possibly from acquisitions for intangible assets. There is a noticeable reduction in the receivables line and increase in cash.
The sum of the market or appraised values of identifiable assets acquired less the fair value of liabilities assumed exceeded the cost to Easton. After revaluing noncurrent assets to zero, there was still some “negative goodwill.” Proper accounting treatment by Easton is to report the amount as A. part of current income in the year of combination. B. a deferred credit and amortize it. C. an extraordinary gain. D. paid-in capital.
Total revenue equals price time’s quantity. It reflects total receipts obtained from selling a certain output or quantity of goods. Total costs is different it’s equal to fixed costs and variable costs. Fixed costs include building and equipment costs, regulatory fees and salaried personnel and remain stable, especially in the short term, but may vary with a longer time horizon. As the time horizon increases, variable costs rely less on existing factors and restrictions and therefore will begin behaving differently which will in turn affect the cost of production (Wright, 2007).
By following the matching principle all of the costs associated with a particular product, not just its wholesale price, is expensed when the item is sold. Requirement 2 - A Generally, the lower of cost or market method is used to value inventory in order to “avoid reporting inventory at an amount greater than the benefits it can provide” (Spiceland, Sepe, & Nelson, 2013, p. 476). According to Spiceland, Sepe, and Nelson (2013) the “change in replacement cost usually is a good indicator of the direction of change in selling price” (p. 477). When the change in replacement cost is negative the LCM method allows companies to apply the conservatism principle. The conservatism principle involves “recognizing expenses and liabilities as soon as possible when there is uncertainty about the outcome, but to only recognize revenues and assets when they are assured of being received” (The conservatism principle).
Explain the difference in the required return estimates from the Value Line to the WSJ price data. The company’s return on common stock using the constant growth model is 7.72% Expected dividend yield = .60/27= 2.22% Cap. Gains Yield=5.5% The expected returns decreased from 8.36%to 7.72% which indicates the company is not as risky because the higher the risk the higher the return. B. What is the relationship between dividend yield and capital gains yield over time under constant growth assumptions?
Liquidity Ratios Liquidity ratios provide information about a firm's ability to meet its short-term financial obligations. The current ratio is the ratio of current assets to current liabilities: Current Ratio | = | Current Assets | | Current Liabilities | | * Interpretation: Current ratio comes from total assets divided by current liabilities. Current assets include cash, accounts and notes receivable (less reserves for bad debts), advances on inventories, merchandise inventories, and marketable securities. This ratio measures the degree to which current assets cover current liabilities. The higher the ratio the more assurance exists that the retirement of current liabilities can be made.
Financial Analysis- Task 5 A. 1. Some key points of the company’s financial picture that could impact the bank officer’s decision are as follows: while there is an increase in gross profits from year 12 to 13, there is a decrease from year 13 to 14, also while the payroll and executive compensations steadily increases from year 12 to 14, advertising basically decreases, and services and utilities continue to increase as well as expenses in general. The operating income also has a major decrease from year 12 to 14, which is not good for the company as it indicates what is available to the company before a few other items need to be paid, such as preferred stock dividends and income taxes, which needs to be increasing for the company, not
A rising ROE suggests that a company is increasing its ability to generate profit without needing as much capital. It also indicates how well a company's management is deploying the shareholders' capital. In other words, the higher the ROE the better. Falling ROE is usually a problem. CAGR: Operating income, % Operating income (EBIT) measures a company's earning power from ongoing operations and it largely used by investor because it excludes the effects of different capital structures and tax rates used in different companies.
So both of the classes of the income are more that 10% of the sum so they must be reported separately. 2. Gross Profit Relating to the revenue FASB ASC 225-10-S99-2 (b) also covers the reporting of the costs related to sales: 2. Costs and expenses applicable to sales and revenues. State separately the amount of (a) cost of tangible goods sold, (b) operating expenses of public utilities or others, (c) expenses applicable to rental income, (d) cost of services, and (e) expenses applicable to other revenues.