Chapter_17_Solutions_7e

Chapter_17_Solutions_7e - Chapter 17 Financial Statement...

Info iconThis preview shows pages 1–7. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 17 Financial Statement Analysis Quick Check Answers: 1. b 3. d 5. a 7. b 9. c 2. c 4. a 6. b 8. d 10. a Explanations: 1. b. 21% increase in Cash = ($2,345 $1,934) / $1,934 = .21 2. c. Cash = 9.6% of total assets = $2,345 / $24,501 = .096 3. d. a, b, and c are all true. 4. a. Acid-test ratio for 2002 = 0.61 [($2,345 + $2,097) / $7,341]. This value is less than 1. 5. a. Inventory turnover = 6 times [$7,105 / ($1,294 + $1,055) / 2] 6. b. Days’ sales in receivables = 37 days, computed as follows: One day’s sales = $54 ($19,564 / 365 days) Average receivables [($2,097 + $1,882) / 2]. . $ 1,990 One day’s sales………………………………… ÷ $54 Days’ sales in average receivables………… 37 days Chapter 17 Financial Statement Analysis 41
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
7. b. Times-interest-earned ratio = 27 times, computed as follows: Operating income / Interest expense ($5,458 / $199 = 27 times) 8. d. Strong return on common stockholders’ equity— for Liberty, Return on common equity = Net income / Average common equity 0.263 = $3,050 / ($11,800 + $11,366) / 2 A 26% return on common stockholders’ equity is strong. 9. c. EPS = $1.22 = Net income / Number of common shares outstanding = $3,050 / 2,500 shares 10. a. Price/earnings ratio = 36 = Market price of stock / EPS = $44 / $1.22 Accounting 7/e Solutions Manual 42
Background image of page 2
Short Exercises (5-10 min.) S 17-1 Increase (Decrease) ( Amounts in millions ) 2006 2005 2006 2005 2004 Amount Percent Amount Percent Revenues $9,993 $9,489 $8,995 $504 5.3% $494 5.5% Cost of sales 5,905 5,785 5,404 Gross profit $4,088 $3,704 $3,591 $384 10.4% $113 3.1% (5-10 min.) S 17-2 1. Trend percentages: 2006 2005 2004 2003 Revenues………… 114% 108% 102% 100% Net income………. 141 131 128 100 2. Net income increased far faster than revenues. Chapter 17 Financial Statement Analysis 43
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
(10-15 min.) S 17-3 Vertical analysis of assets: 2006 Amount Percent Cash $ 48,000 26.4% Inventory 38,000 20.9 Property, plant, and equipment, net 96,000 52 .7 Total assets $182,000 100 .0 % (10 min.) S 17-4 Sanchez Alioto Amount Percent Amount Percent Net sales $9,489 100 .0 % $19,536 100.0 % Cost of goods sold 5,785 61.0 14,101 72.2 Other expense 3,114 32 .8 4,497 23.0 Net income $ 590 6 .2 % $ 938 4.8 % Alioto earns more net income. Sanchez’s net income is a higher percentage of net sales. These data show how common-size financial statements enable us to compare companies of different sizes. Accounting 7/e Solutions Manual 44
Background image of page 4
(5-10 min.) S 17-5 1. ( Dollar amounts in billions ) 2006 2005 Total current assets $6.7 $5.6 Total current liabilities $4.4 $3.6 = 1.52 = 1.55 2. Lowe’s current ratio deteriorated a little during 2006. Chapter 17 Financial Statement Analysis 45
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
S 17-6 (Dollar amounts in billions) a. Inventory turnover = Cost of goods sold = $21.2 Average inventory ($4.6 + $4.0) / 2 = $21.2 = 4.9 times $ 4.3 b. Days’ sales in receivables: One day’s = $30.8 = $.084 sales 365 Average net Days’ sales in = receivables
Background image of page 6
Image of page 7
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 37

Chapter_17_Solutions_7e - Chapter 17 Financial Statement...

This preview shows document pages 1 - 7. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online