ACCG100 Lecture Notes - Lecture 9: Current Liability, Profit Margin, Management Accounting

18 views5 pages

copperfly610

15 Aug 2018

School

Macquarie University

Department

Accounting and Corporate Governance

Course

ACCG100

Professor

Colly He

For unlimited access to Class Notes, a Class+ subscription is required.

Document Summary

Expressed in terms of percentages, rates or proportions. Measure operating success of an entity for a given time period. Indicates amount of net profit generated by cash invested in assets. Indicates amount of net profit generated by each dollar of sales. Measures short-term ability of entity to pay its maturing obligations and to meet unexpected needs for cash. Current ratio indicates how much current assets exceed current liabilities for a dollar-for-dollar basis (rule of thumb is normally 1. 5:1). Current ratio = current assets/ current liabilities. Measures ability of entity to survive over a long period of time. Measures percentage of assets financed by creditors rather than shareholders. Higher the ratio, the greater the risk that entity may be unable to pay its debts as they become due. Debt to total assets ratio = total liabilities/total assets. Week 9: introduction to management accounting and budgeting.

Related Questions

1. The formula for Accounts Receivable turnover is

Select one:

a. Net Sales / average accounts receivable

b. Cost of goods sold / average accounts receivable

c. Net Sales / average merchandise inventory

d. 360 days / average accounts receivable

2. The category of ratios that determine the economic status ofpublicly-traded companies is

Select one:

a. Profitability ratios

b. Market value ratios

c. Liquidity Ratios

d. Solvency ratios

3. The working capital ratio is

Select one:

a. Quick assets / current liabilities

b. Working capital /current liabilities

c. Current assets minus current liabilities

d. Current assets/current liabilities

4. Earnings per share is calculated by

Select one:

a. Dividing net income by the authorized ordinary shares.

b. Dividing net income less preferred dividends by number ofordinary shares outstanding.

c. None of the above.

d. Dividing net income by the total number of ordinary andpreferred shares issued.

5. Which of the following belong to the profitabilityratios?

Select one:

a. Rate of return on equity

b. Rate of return on assets

c. All of the above

d. Gross Profit Margin

6. The category of ratios that shows the ability of the firm topay its long-term obligations is

Select one:

a. Profitability ratios

b. Solvency ratios

c. Market value ratios

d. Liquidity Ratios

7. Operating profit margin equals

Select one:

a. Income from operations / sales

b. Net income / sales

c. Gross profit / sales

d. Profit from operations / cost of sales

8. The following are quick assets except

Select one:

a. Short-term investments

b. Merchandise Inventory

c. Accounts Receivable

d. Cash

9. The following are liquidity ratios except

Select one:

a. Earnings per share

b. Working capital ratio

c. Quick ratio

d. Receivable turnover

10. Quick assets equals

Select one:

a. All current assets

b. Cash and Accounts receivable only.

c. Total assets less non-current assets

d. Current assets minus inventory

jadebear393

Hillside,Inc.

BALANCE SHEET					INCOME STATEMENT
($ in millions)					($ in millions)

ASSETS		LIABILITIES			Revenue	28,681.10
Cash & Marketable Securities	449.90	Accounts Payable	1,611.20		Cost Of Goods Sold	20,768.80
Accounts Receivable	954.80	Salaries Payable	225.20		Gross Profit	7,912.30
Inventories	3,645.20	Other Current Liabilities	1,118.80
Other Current Assets	116.60	Total Current Liabilities	2,955.20		Operating Expenses:
Total Current Assets	5,166.50				Selling, General & Admin.	5,980.80
		Other Liabilities	693.40		Depreciation	307.30
Machinery & Equipment	1,688.90				Operating income	1,624.20
Land	1,129.70	Total Liabilities	3,648.60
Buildings	2,348.40				Interest	-
Depreciation	(575.60)	SHAREHOLDER'S EQUITY			Other Expense (Income)	(13.10)
Property, Plant & Equip. - Net	4,591.40	Common Stock	828.50		Income Before Taxes	1,637.30
Other Long Term Assets	120.90	Retained Earnings	5,401.70		Income Taxes	618.10
Total Long-Term Assets	4,712.30	Total Shareholder's Equity	6,230.20		Net Income	1,019.20

Total Assets	9,878.80	Total Liabilities & Equity	9,878.80
					Number of Common Stock
					Shares Outstanding	1,032,271


		Input Answers Below		Financial Performance Summary
LIQUIDITY RATIOS
Current Ratio (times)
Quick Ratio (times)
Average Payment Period (days)

ASSET MANAGEMENT RATIOS
Total Asset Turnover (times)
Average Collection Period (days)
Inventory Turnover (times)

FINANCIAL LEVERAGE RATIOS
Total Debt to Total Assets
Equity Multiplier (times)

PROFITABILITY RATIOS
Operating Profit Margin
Net Profit Margin
Return on Total Assets
Return on Equity
Earnings per Share

viridianporcupine777

Off centered a little bit, sorry.

Comparative Statements of Income & Balance Sheets

For Southwest Materials, Inc., are as follows:

Southwest Materials, Inc.

Consolidated Statements of Income

For the Last Four Fiscal Years of Operations (000âs $)

20x3 20x2 20x1 20x0

Net Sales $93,000 $89,460 $83,200 $72,410

Cost of Sales 70,600 68,440 64,480 55,760

Gross Profit 22,400 21,020 18,720 16,650

Selling, G&A Expenses 9,300 9,390 8,320 7,600

Operating Profit 13,100 11,630 10,400 9,050

Interest Expense (470) (450) (420) (150)

Interest Income 90 90 80 70

G(L) on Sale of Assets 2,450 2,710 2,420 370

Income Before Taxes 15,170 13,980 12,480 9,340

Provision for Taxes 5,110 4,920 4,160 3,260

Net Income $10,060 $ 9,060 $ 8,320 $ 6,080

Requirements:

Based upon the Income Statement and Balance Sheet data, complete the requested liquidity, solvency and profitability ratios.

Southwest Materials, Inc.

Consolidated Balance Sheets

For the Last Four Fiscal Years of Operations (000âs $)

20x3 20x2 20x1 20x0

Assets

Current Assets

Cash & Cash Equivalents $ 4,270 $ 3,640 $ 420 $ 470

Accounts Receivable, Net 12,000 11,310 10,470 9,420

Inventories 4,000 3,840 3,870 2,950

Prepaid Expense 900 750 660 520

Total Current Assets 21,170 19,540 15,420 13,360

Property, Plant & Equipment

Land 21,770 20,110 18,910 17,460

Plant & Equipment 101,390 94,750 89,560 76,190

Gross P. P. & E. 123,160 114,860 108,470 93,650

Less: Accum Depreciation 56,010 51,220 47,650 41,160

Net Property, Plant & Equip 67,150 63,640 60,820 52,490

Goodwill 7,000 6,830 6,140 5,870

Other Assets 5,000 4,380 3,880 3,800

Total Assets $100,320 $ 94,390 $ 86,260 $ 75,520

Liabilities & Equity

Current Liabilities

Accounts Payable $ 5,400 $ 5,320 $ 5,260 $ 5,200

Accrued Liabilities 4,300 4,320 4,360 7,960

Current Portion L-T-Debt 950 1,140 470 290

Total Current Liabilities 10,650 10,780 10,090 13,450

Long-Term Liabilities

Long-Term Debt 11,500 15,120 18,950 11,560

Deferred Income Taxes 7,500 6,910 4,820 3,990

Accrued Employee Benefits 3,500 3,610 3,410 3,680

Total Long-Term Liabilities 22,500 25,640 27,180 19,230

Total Liabilities 33,150 36,420 37,270 32,680

Stockholdersâ Equity

Common Stock, $0.10 Par Val 240 240 240 240

Capital in Excess of Par 2,350 2,350 2,350 2,350

Retained Earnings 64,880 56,020 48,120 40,730

Less Cost of Treasury Stock (300) (640) (1,720) (480)

Total Stockholdersâ Equity 67,170 57,970 48,990 42,840

Total Liabilities & Equity $100,320 $ 94,390 $ 86,260 $ 75,520

Southwest Materials, Inc. â Requested Ratios

20x3 20x2 20x1

Liquidity Ratios:

Current Ratio __________ __________ __________

Acid-Test Ratio __________ __________ __________

Accounts Rec Turnover Ratio __________ __________ __________

Inventory Turnover Ratio __________ __________ __________

Daysâ Sales Uncollected __________ __________ __________

Daysâ Sales in Inventory __________ __________ __________

Cash-to-Cash Operating Cycle __________ __________ __________

Note: Use the Alternate Equations Presented in the PowerPoints for

Daysâ Sales Uncollected, Daysâ Sales in Inventory,

and Cash-to-Cash Operating Cycle

Total Asset Turnover __________ __________ __________

Solvency Ratios:

Debt Ratio __________ __________ __________

Equity Ratio __________ __________ __________

Debt-to-Equity Ratio __________ __________ __________

Times Interest Earned Ratio __________ __________ __________

Profitability Ratios:

Gross Margin Ratio __________ __________ __________

Operating Income Margin Ratio __________ __________ __________

Profit Margin Ratio __________ __________ __________

Note: Use the Equation Presented in the PowerPoints for the

Operating Income Margin Ratio

Return on Total Assets __________ __________ __________

Return on Equity __________ __________ __________

coppercattle818

ACCG100 Lecture Notes - Lecture 9: Current Liability, Profit Margin, Management Accounting

Document Summary

Get access

Related Documents

ACCG100 Lecture Notes - Lecture 11: Gross Margin, Contribution Margin, Fixed Cost

ACCG100 Lecture Notes - Lecture 10: Management Accounting, Profit Margin, Current Liability

Related Questions