1. Claremont Corp has the following inventory balances for 2009:beginning, $468,000; ending, $444,000. The companyâs cost of goodssold for the year was $4,370,400.
What was Claremont Corp.âs average inventory for 2009?
What is the companyâs inventory turnover ratio?
Calculate the average age of inventory for Claremont Corp.
Assume that Claremont Corp is a retail toy company, and itsfiscal year-end is December 31. Would Claremontâs inventory be atan annual high or low at the end of the year? In this situation,would the inventory turnover ratio provide valid information to adecision maker? Why or why not?
Given the information in Part D, how might you obtain a betterindication of the average amount of inventory that Claremont Corphand on-hand during the year?
2. Itâs Good, YâAll! is a Texas-based company that operates alarge chain of restaurants. The following information is availablefor the company (in thousands):
Category 2007 2008 2009 Net Sales $400,577 $517,616 $640,898 Cost of Goods Sold $130,885 $171,708 $215,071 Net Income $33,943 $46,652 $57,497 Ending Inventory $23,192 $28,426 $41,989
Compute the companyâs inventory turnover ratio and age ofinventory for 2007 through 2009. Beginning inventory for 2007 was$15,746,000.
Comment on the ratios computed in Part A. Are there any definitetrends in theses ratios? If so, are these trends favorable orunfavorable? Explain.
Why do decision makers pay close attention to the age of aninventory statistic for companies in the restaurant industry?
3. Li Enterprises recently purchased new computer equipment forits company headquarters. The following is information regardingthe various cash expenditures related to the acquisition of thisequipment:
The invoice price of the equipment was $300,000, however, Liâsowner negotiated a 15% price reduction.
The equipment was shipped to Liâs headquarters FOB shippingpoint. The delivery cost was $2,750.
Li paid $1,870 to hire a computer consultant to install and testthe new equipment.
Supplies costing $135 were used in installing and testing theequipment.
The day following the installation of the equipment, one of Liâsemployees broke a USB port on the computer equipment. The companypaid $265 to have the port replaced.
Determine the acquisition cost of the computer equipment foraccounting purposes.
A computer purchased for several thousand dollars may havelittle resale value one year later because of technological changesin the computer industry. Given that the resale value of computersand computer equipment can decline rapidly, is historical cost theproper valuation basis to use for such assets? Defend youranswer.
1. Claremont Corp has the following inventory balances for 2009:beginning, $468,000; ending, $444,000. The companyâs cost of goodssold for the year was $4,370,400.
What was Claremont Corp.âs average inventory for 2009?
What is the companyâs inventory turnover ratio?
Calculate the average age of inventory for Claremont Corp.
Assume that Claremont Corp is a retail toy company, and itsfiscal year-end is December 31. Would Claremontâs inventory be atan annual high or low at the end of the year? In this situation,would the inventory turnover ratio provide valid information to adecision maker? Why or why not?
Given the information in Part D, how might you obtain a betterindication of the average amount of inventory that Claremont Corphand on-hand during the year?
2. Itâs Good, YâAll! is a Texas-based company that operates alarge chain of restaurants. The following information is availablefor the company (in thousands):
| Category | 2007 | 2008 | 2009 |
|---|---|---|---|
| Net Sales | $400,577 | $517,616 | $640,898 |
| Cost of Goods Sold | $130,885 | $171,708 | $215,071 |
| Net Income | $33,943 | $46,652 | $57,497 |
| Ending Inventory | $23,192 | $28,426 | $41,989 |
Compute the companyâs inventory turnover ratio and age ofinventory for 2007 through 2009. Beginning inventory for 2007 was$15,746,000.
Comment on the ratios computed in Part A. Are there any definitetrends in theses ratios? If so, are these trends favorable orunfavorable? Explain.
Why do decision makers pay close attention to the age of aninventory statistic for companies in the restaurant industry?
3. Li Enterprises recently purchased new computer equipment forits company headquarters. The following is information regardingthe various cash expenditures related to the acquisition of thisequipment:
The invoice price of the equipment was $300,000, however, Liâsowner negotiated a 15% price reduction.
The equipment was shipped to Liâs headquarters FOB shippingpoint. The delivery cost was $2,750.
Li paid $1,870 to hire a computer consultant to install and testthe new equipment.
Supplies costing $135 were used in installing and testing theequipment.
The day following the installation of the equipment, one of Liâsemployees broke a USB port on the computer equipment. The companypaid $265 to have the port replaced.
Determine the acquisition cost of the computer equipment foraccounting purposes.
A computer purchased for several thousand dollars may havelittle resale value one year later because of technological changesin the computer industry. Given that the resale value of computersand computer equipment can decline rapidly, is historical cost theproper valuation basis to use for such assets? Defend youranswer.
Related questions
Itâs Good, YâAll! is a Texas-based company that operates a largechain of restaurants. The following information is available forthe company (in thousands):
| Category | 2007 | 2008 | 2009 |
|---|---|---|---|
| Net Sales | $400,577 | $517,616 | $640,898 |
| Cost of Goods Sold | $130,885 | $171,708 | $215,071 |
| Net Income | $33,943 | $46,652 | $57,497 |
| Ending Inventory | $23,192 | $28,426 | $41,989 |
Compute the companyâs inventory turnover ratio and age ofinventory for 2007 through 2009. Beginning inventory for 2007 was$15,746,000.
Comment on the ratios computed in Part A. Are there any definitetrends in theses ratios? If so, are these trends favorable orunfavorable? Explain.
Why do decision makers pay close attention to the age of aninventory statistic for companies in the restaurant industry?
You have just been hired as a financial analyst for LydexCompany, a manufacturer of safety helmets. Your boss has asked youto perform a comprehensive analysis of the companyâs financialstatements, including comparing Lydexâs performance to its majorcompetitors. The companyâs financial statements for the last twoyears are as follows: |
| Lydex Company Comparative Balance Sheet | ||||
| This Year | Last Year | |||
| Assets | ||||
| Currentassets: | ||||
| Cash | $ | 930,000 | $ | 1,170,000 |
| Marketable securities | 0 | 300,000 | ||
| Accounts receivable, net | 2,580,000 | 1,680,000 | ||
| Inventory | 3,570,000 | 2,200,000 | ||
| Prepaid expenses | 250,000 | 190,000 | ||
| Total currentassets | 7,330,000 | 5,540,000 | ||
| Plant and equipment,net | 9,460,000 | 9,020,000 | ||
| Total assets | $ | 16,790,000 | $ | 14,560,000 |
| Liabilities andStockholders' Equity | ||||
| Liabilities: | ||||
| Current liabilities | $ | 3,980,000 | $ | 2,920,000 |
| Note payable, 10% | 3,640,000 | 3,040,000 | ||
| Totalliabilities | 7,620,000 | 5,960,000 | ||
| Stockholders'equity: | ||||
| Common stock, $70 parvalue | 7,000,000 | 7,000,000 | ||
| Retained earnings | 2,170,000 | 1,600,000 | ||
| Total stockholders'equity | 9,170,000 | 8,600,000 | ||
| Total liabilitiesand stockholders' equity | $ | 16,790,000 | $ | 14,560,000 |
| Lydex Company Comparative Income Statement and Reconciliation | ||||
| This Year | Last Year | |||
| Sales (all onaccount) | $ | 15,830,000 | $ | 13,280,000 |
| Cost of goodssold | 12,664,000 | 9,960,000 | ||
| Gross margin | 3,166,000 | 3,320,000 | ||
| Selling andadministrative expenses | 1,402,000 | 1,592,000 | ||
| Net operatingincome | 1,764,000 | 1,728,000 | ||
| Interestexpense | 364,000 | 304,000 | ||
| Net income beforetaxes | 1,400,000 | 1,424,000 | ||
| Income taxes(30%) | 420,000 | 427,200 | ||
| Net income | 980,000 | 996,800 | ||
| Commondividends | 410,000 | 498,400 | ||
| Net incomeretained | 570,000 | 498,400 | ||
| Beginning retainedearnings | 1,600,000 | 1,101,600 | ||
| Ending retainedearnings | $ | 2,170,000 | $ | 1,600,000 |
To begin yourassigment you gather the following financial data and ratios thatare typical of companies in Lydex Companyâs industry: |
| Current ratio | 2.3 | |
| Acid-test ratio | 1.1 | |
| Average collectionperiod | 40 | days |
| Average saleperiod | 60 | days |
| Return onassets | 8.9 | % |
| Debt-to-equityratio | .68 | |
| Times interestearned ratio | 5.9 | |
| Price-earningsratio | 10 | |
Garrison 15e Recheck 2015-1-19, 09_17_2014_QC_54324,12_11_2014_QC_CS-386 03_23_2016_QC_CS-39050,09_22_2016_QC_CS-61528
1.
value:
1.50 points
Required information
| Required: |
| 1. | You decide first to assess the companyâs performance in terms ofdebt management and profitability. Compute the following for boththis year and last year: (Round your intermediatecalculations and final percentage answers to 1 decimal place. i.e.,0.123 should be considered as 12.3%. Round the rest of theintermediate calculations and final answers to 2 decimalplaces.) |
| a. | The times interest earnedratio. |
| b. | The debt-to-equity ratio. |
| c. | The gross marginpercentage. |
| d. | The return on total assets.(Total assets at the beginning of last year were $13,040,000.) |
| e. | The return on equity.(Stockholdersâ equity at the beginning of last year totaled$8,101,600. There has been no change in common stock over the lasttwo years.) |
| f. | Is the companyâs financialleverage positive or negative? |
| 2. | You decide next to assess the companyâs stock marketperformance. Assume that Lydexâs stock price at the end of thisyear is $88 per share and that at the end of last year it was $56.For both this year and last year, compute: (Round yourintermediate calculations and final percentage answers to 1 decimalplace. i.e., 0.123 should be considered as 12.3%. Round the rest ofthe intermediate calculations and final answers to 2 decimalplaces.) |
| a. | The earnings per share. | ||||||||||||||||
| b. | The dividend yield ratio. | ||||||||||||||||
| c. | The dividend payout ratio. | ||||||||||||||||
| d. | The price-earnings ratio. | ||||||||||||||||
| e. | The book value per share of common stock.
|
Problem 13-15A Comprehensive Ratio Analysis [LO13-2, LO13-3, LO13-4, LO13-5, LO13-6]
| [The following information applies to the questions displayed below.] |
| You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the companyâs financial statements, including comparing Lydexâs performance to its major competitors. The companyâs financial statements for the last two years are as follows: |
| Lydex Company Comparative Balance Sheet | ||||
| This Year | Last Year | |||
| Assets | ||||
| Current assets: | ||||
| Cash | $ | 950,000 | $ | 1,190,000 |
| Marketable securities | 0 | 300,000 | ||
| Accounts receivable, net | 2,660,000 | 1,760,000 | ||
| Inventory | 3,590,000 | 2,400,000 | ||
| Prepaid expenses | 260,000 | 200,000 | ||
| Total current assets | 7,460,000 | 5,850,000 | ||
| Plant and equipment, net | 9,500,000 | 9,040,000 | ||
| Total assets | $ | 16,960,000 | $ | 14,890,000 |
| Liabilities and Stockholders' Equity | ||||
| Liabilities: | ||||
| Current liabilities | $ | 4,000,000 | $ | 2,960,000 |
| Note payable, 10% | 3,660,000 | 3,060,000 | ||
| Total liabilities | 7,660,000 | 6,020,000 | ||
| Stockholders' equity: | ||||
| Common stock, $70 par value | 7,000,000 | 7,000,000 | ||
| Retained earnings | 2,300,000 | 1,870,000 | ||
| Total stockholders' equity | 9,300,000 | 8,870,000 | ||
| Total liabilities and stockholders' equity | $ | 16,960,000 | $ | 14,890,000 |
| Lydex Company Comparative Income Statement and Reconciliation | ||||
| This Year | Last Year | |||
| Sales (all on account) | $ | 15,850,000 | $ | 13,480,000 |
| Cost of goods sold | 12,680,000 | 10,110,000 | ||
| Gross margin | 3,170,000 | 3,370,000 | ||
| Selling and administrative expenses | 1,704,000 | 1,600,000 | ||
| Net operating income | 1,466,000 | 1,770,000 | ||
| Interest expense | 366,000 | 306,000 | ||
| Net income before taxes | 1,100,000 | 1,464,000 | ||
| Income taxes (30%) | 330,000 | 439,200 | ||
| Net income | 770,000 | 1,024,800 | ||
| Common dividends | 340,000 | 512,400 | ||
| Net income retained | 430,000 | 512,400 | ||
| Beginning retained earnings | 1,870,000 | 1,357,600 | ||
| Ending retained earnings | $ | 2,300,000 | $ | 1,870,000 |
| To begin your assigment you gather the following financial data and ratios that are typical of companies in Lydex Companyâs industry: |
| Current ratio | 2.4 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acid-test ratio | 1.1 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average collection period | 40 | days | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Average sale period | 60 | days | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Return on assets | 9.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt-to-equity ratio | .65 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Times interest earned ratio | 5.8 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Price-earnings ratio | 10 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Part 1
Part 2
Part 3
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