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MGAB01H3 Chapter Notes -Profit Margin, Asset, Asset Turnover

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whitemarten530
21 Oct 2012
School
UTSC
Department
Financial Accounting
Course
MGAB01H3
Professor
Daga Sandra

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Related Questions

1. Economic entity assumption 6. Matching principle
2. Going concern assumption 7. Full disclosure principle
3. Monetary unit assumption 8. Revenue recognition principle
4. Time period assumption 9. Materiality
5. Cost principle 10. Conservatism

(a) Is the rationale for why plant assets are not reported atliquidation value. (Do not use
historical cost principle.)
(b) Indicates that personal and business record-keeping should beseparately maintained.
(c) Ensures that all relevant financial information isreported.
(d) Assumes that the dollar is the “measuring stick” used to reporton financial performance.
(e) Requires that the operational guidelines be followed for allsignificant items.
(f ) Separates financial information into time periods forreporting purpose.
(g) Requires recognition of expenses in the same period as relatedrevenues.
(h) Indicates that market value changes subsequent to purchase arenot recorded in the accounts.

Title: Calculating and Analyzing Ratios
Based on the financial information provided, calculate thefollowing ratios and explain their purpose: Current Ratio InventoryTurnover Ratio

Accounts Receivable TurnoverRatio

Debt to Equity Ratio

Return on Assets Ratio

Asset Turnover Ratio

Return on Equity Ratio

Profit Margin Ratio

Price-Earnings Ratio

Dividend Yield Ratio

12/31/2010 12/31/2009
Amount in Dollars Amount in Dollars
Cash 200.00 150.00
Receivables 500.00 350.00
Inventories 750.00 755.00
Other Current Assets 100.00 75.00
Total Current Assets 1,550.00 1,330.00
Plant and Equipment 1,100.00 1,170.00
Other Long - Term Assets 150.00 100.00
Total Assets 2,800.00 2,600.00
Accounts Payable 510.00 400.00
Other Current Liabilities 25.00 25.00
Total Current Liabilities 535.00 425.00
Long Term Debt 375.00 400.00
Other Long Term Liabilities 225.00 175.00
Preferred Stock 250.00 250.00
Shareholders' Equity 1,415.00 1,350.00
Total Liabilities and Shareholders' Equity 2,800.00 2,600.00

Considering Amazon's balance sheet ratios below, please provide a overview of the company's strengths and weaknesses (if any), reasons for the strength/weakness (if any), and reccomendations.

2015

Debt to asset ratio = total liabilities / total assets

8,235 / 65,444 = 12.58%

Debt to equity ratio = total liabilities / shareholders’ equity

8,235 / 13,384 = 61.53%

2016

Debt to asset ratio = total liabilities / total assets

7,694 / 83,402 = 9.23%

Debt to equity ratio = total liabilities / shareholders’ equity

7,694 / 19,285 = 39.90%