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Note: advanced managerial accounting

Question 1: ZZ Tire Company has grown a lot and has noticed that they are starting to take on a lot of debt in opening new retail installation locations. You are brought in as a consultant to analyze their financial situation. Look through the four types of financial ratios (liquidity, leverage, profitability, and market measure ratios). Briefly describe each type of ratio. Then figure out which type of financial ratios you would use to look at ZZ Tires debt issues. Question 2: Selected information from the comparative financial statements of ZZ Tire Company for the year ended December 31, appears below: 2014 2013 Accounts receivable (net) $ 180,000 $200,000 Inventory 140,000 160,000 Total assets 1,200,000 800,000 Current liabilities 140,000 110,000 Long-term debt 400,000 300,000 Net credit sales 1,330,000 700,000 Cost of goods sold 900,000 530,000 Interest expense 50,000 25,000 Income tax expense 60,000 29,000 Net income 150,000 85,000 There is no preferred stock and the tax rate is 30%. Required: Calculate each of the following for 2014: a. Debt ratio b. Debt-to-equity ratio c. Times interest earned ratio d. Gross margin percentage
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e. Return on assets f. Return on common stockholders’ equity
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advanced management accounting.docx

Running head: RATIO ANALYSIS 1 Ratio analysis
Date RATIO ANALYSIS 2 Ratio analysis
Question 1
Liquidity ratios
These are ratios that are used to measure the capacity of a company...

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