MGA 301 Chapter Notes - Chapter 5: Asset, Deferral, Current Liability

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orchidcockroach288

19 Dec 2016

School

University at Buffalo

Department

Management Accounting

Course

MGA 301

Professor

Chen Jing

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Document Summary

Chapter 5 balance sheet and statement of cash flows. Balance sheet(cid:525)statement of financial positions, reports the assets, liabilities and stockholders" equity of a business enterprise at a specific date. Liquidity(cid:525) (cid:532)the amount of time that is expected to elapse until an asset is realized or otherwise converted into cash or until a liability has to be paid(cid:533) -short-term liquidity ratios (ratio of cash to short-term liabilities)(cid:525)indicate whether a company will have the resources to pay its current and maturing obligations; evaluate the possibility of future cash dividends or the buyback of shares. Solvency(cid:525)the ability of a company to pay its debts as they mature. -higher debt, riskier: need more assets to meet fixed obligations (interest and principal) Financial flexibility(cid:525) (cid:532)ability of an enterprise to take effective actions to alter the amounts and timing of cash flows so it can respond to unexpected needs and opportunities. -whether have cash to finance expansion or to pat off maturing debt.

Related Questions

Measuring Ability to Pay Liabilities

LeBronson's Companies Balance Sheet May 31, 2018 and 2017LeBronson's companies has 10,000 common shares outstanding during2018

Assets			Liabilities
	2018	2017		2018	2017
Cash	2,400	900.00	Total Current Liabilties	28,000	13,200
Short-Term Investments	28,000	9,000	Long-Term Liabilities	13,900	10,300
Accounts Receivable	7,500	5,200	Total Liabilities	41,900	23,500
Merchandise Inventory	6,900	8,600	Stockholder's Equity
Other Current Assets	8,000	1,500	Common Stock	11,000	11,000
Total Current Assets	52,800	25,200	Retained Earnings	29,900	19,700
All Other Assets	30,000	29,000	Total Equity	40,900	30,700
Total Assets	82,800	54,200	Total Liabilities and Equity	82,800	54,200

Calculating these objectives

A. Calculate the debt ratio and the debt to equity ratio at May31, 2018, for LeBronson's Companies.

B. Is LeBronson's ability to pay its liabilities good or bad?Explain your decision or findings.

goldgrasshopper756

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

Prepare a statement of cash flows using the indirect method.

Condensed financial data of Pat Metheny Company for 2014 and2013 are presented below.

PAT METHENY COMPANY COMPARATIVE BALANCE SHEET AS OF DECEMBER 31, 2014 AND 2013
	2014		2013
Cash	$1,790		$1,106
Receivables	1,755		1,300
Inventory	1,582		1,901
Plant assets	1,899		1,706
Accumulated depreciation	(1,195	)	(1,170	)
Long-term investments (held-to-maturity)	1,299		1,478
	$7,130		$6,321

Accounts payable	$1,217		$796
Accrued liabilities	208		250
Bonds payable	1,416		1,650
Capital stock	1,894		1,700
Retained earnings	2,395		1,925
	$7,130		$6,321

PAT METHENY COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014
Sales revenue		$6,825
Cost of goods sold		4,695
Gross margin		2,130
Selling and administrative expenses		939
Income from operations		1,191
Other revenues and gains
Gain on sale of investments		83
Income before tax		1,274
Income tax expense		541
Net income		$733
Cash dividends		263
Income retained in business		$470

Additional information:

During the year, $64 of common stock was issued in exchange forplant assets. No plant assets were sold in 2014.

Prepare a statement of cash flows using the indirect method.(Show amounts that decrease cash flow with either a -sign e.g. -15,000 or in parenthesis e.g.(15,000).)

whiteferret247

MGA 301 Chapter Notes - Chapter 5: Asset, Deferral, Current Liability

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