Chapter 11 Solutions

Chapter 11 Solutions - Chapter 11 Expanded Analysis TO THE...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Chapter 11 Expanded Analysis TO THE NET 1. a. Baldor Electric Company is a leading manufacturing company of industrial electric motors, drives, and generators, currently supplying over 8,000 customers in more than 160 industries. b. December 30, 2006 December 31, 2005 Inventory balance $116,287,000 $114,096,000 Inventory resolve 44,230,000 35,607,000 c. 2006 Net income $48,118,000 d. 2006 effect tax rate 36.5% (from note D Income taxes) e. The approximate income for 2006 if inventory had been valued at approximate current cost. 2006 Net income $ 48,118,000 Net increase in inventory reserve: 2006 $ 44,230,000 2005 35,607,000 (a) $ 8,623,000 (b) Effective tax rate 36.5% (c) Changes in taxes (a x b) $ 3,147,395 (d) Net increase in income (a c) 5,475,605 $ 53,593,605 2. a. Omnova Solutions is an innovator of emulsion polymers, specialty chemicals, and decorative and functional surfaces for a variety of commercial, industrial, and residential end uses. b. November 30, Income (loss) from 2006 2005 Continuing operations $3,200,000 ($2,700,000) 82 c. 1. Inventories valued using the LIFO method represented approximately 74% of total replacement cost of inventories at both November 30, 2006 and 2005. 2. The liquidation of LIFO inventory layers reduced cost of products sold for continuing operations by $6,000,000 in 2006. LIFO inventory adjustments increased consolidated net income by $2.6 million. 3. During 2006, net LIFO inventory adjustments increased segment operating profit for Performance Chemicals and Decorative Products by $2.3 million. 83 QUESTIONS 11- 1. Based on the study reported in the text, liquidity and debt ratios are regarded as the most significant ratios by commercial loan officers. 11- 2. (a) Debt/equity, current ratio (b) Debt/equity, current ratio 11- 3. The dividend payout ratio does not primarily indicate liquidity, debt, or profitability. It is a ratio that is of interest to investors because it indicates the percentage of earnings that is being paid out in dividends. From a view of controlling a loan and preventing the stockholders from being paid before the bank is paid, the dividend payout ratio can be used as an effective ratio. 11- 4. Based on the study reported in the text, financial executives do regard profitability ratios as the most significant ratios. 11- 5. 1) Earnings per Share profitability 2) Debt/Equity debt 3) Return on Equity profitability 4) Current Ratio liquidity 5) Net Profit Margin profitability 11- 6. The CPAs gave the highest significance rating to two liquidity ratios. These ratios are the current ratio and the accounts receivable turnover days. The highest-rated profitability ratio was after-tax return on equity, while the highest- rated debt ratio was debt/equity....
View Full Document

Page1 / 55

Chapter 11 Solutions - Chapter 11 Expanded Analysis TO THE...

This preview shows document pages 1 - 4. Sign up to view the full document.

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