| Huffman Trucking | Memo To: Graham Grove, Vice President of Industrial Relations From: Paul Johnson Director of Accounting CC: Simone Ojeda Accounting Specialist Date: [ 4/9/2012 ] Re: Results from ratio calculations and horizontal and vertical analysis What do the liquidity, profitability, and solvency ratios reveal about the company’s financial position? Liquidity ratios are the ratios that measure the ability of Huffman Trucking to meet its short term debt obligations. These ratios measure the ability of this company to pay off its short-term liabilities when they fall due. Profitability ratios measures Huffman Trucking’s ability to generate earnings relative to sales, assets and equity. These ratios assess the ability of the company to generate earnings, profits and cash flows relative to some metric, often the amount of money invested.
The balance sheet connects to income statements, in turn also connected to cash flow statement. Occurrences or a change to the net cash activities of the cash flow statement affects the balance sheet. The balance sheet is useful when estimating the potential of the organization in order for them to achieve there long-term mission. However, cash flow statement displays the exchange of currency among an organization and external agents. For example, the cash flow can be affected when the company purchases products, and if the costs of the products are an outstanding amount in turn it will affect the assets on the balance sheet.
How does Net Sales change during these three years? What could be the reason for the change in Net Sales in 2011? According to the Risk factors mentioned in the Financial Statements, factors such as current economic conditions, timing of new merchandise releases and promotional events, changes in merchandise mix, success of marketing programs, and weather conditions are the main factors that affect sales in a company such as The Gap Inc. 4. What was the change of Retained Earnings from the year 2010 to 2011? Retained earnings increase by $597.00 they raised from $11,767.00 to $12,364.00, an increase approximately of 5.07% And what was the Net Income for the year 2011?
Explain the rules of debits and credits in a way that will help him understand them. Cite examples for each of the major sections of the balance sheet (assets, liabilities and stockholders' equity) and the income statement (revenues and expenses). (TCOs B & E) The Caltor Company gathered the following condensed data for the year ended December 31, 2010 Click here to
The second ratio measures the effect of interest; it indicates the proportion of earnings before interest and tax that is retained after paying interest. It should be considered together with the leverage component (assets/equity). The third ratio measures the company’s operating profit on sales; it can be broken down into subcomponents such as gross profit margin. Common-sized income statements can help with
As for the balance sheet, it shows the assets, liabilities, and stockholder’s equity for a specified date. The balance sheet reflects the organization’s financial position. The total assets within the balance sheet must equal the total liabilities and stockholder equity. The statement of cash flow states the cash inflows as well as outflows from the operating, financing, and investing transactions during a specific period. It reports the organization’s beginning and ending cash, investing and financing
The debt ratio is total debt divided by total assets. It provides owners with information on how much debt financing is being use to purchase assets. The lower percentages indicate a company finances business operations through cash rather than debt. (Vitez) The debt-to-equity ratio is total debt divided by total equity. This calculates how much of the business is financed through private investors; it is also expressed in percentage form.
LIQUIDITY RATIO Ratio analysis expresses the relationship among selected items of financial statement data. Liquidity ratio is one of the three ratios, it measures short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. Measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash. Short-term creditors such as bankers and suppliers are particularly interested in assessing liquidity. Ratios include the current ratio, the current cash debt coverage ratio, the receivables turnover ratio, the average collection period, the inventory turnover ratio, and average days in inventory.
Which of the following choices regarding the proprietary fund financial statements is true? A. The Statement of Net Assets (Balance Sheet) reflects equity as contributed equity and retained earnings. B. Normally, a reconciliation is required between the proprietary fund financial statements and the business-type activities column in the government-wide financial statements.