7-1 Problem Set - Chapter 14 (100%) PDF

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Grade A (100%) ...

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Vertical analysis

Using the income statement information for Einsworth Corporation that follows, prepare a vertical analysis of the income statement for Einsworth Corporation.

Score: 10/10

Einsworth Corporation Income Statement



1 2

Sales

3

Cost of goods sold

4

Gross profit

$1,200,000.00

100.0%

780,000.00

65.0%

$420,000.00

35.0%

✔ ✔ ✔

Points:

3/3

Feedback Check My Work Divide each element by sales to determine the vertical analysis percentage.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Current Position Analysis The following items are reported on a company's balance sheet: Cash

$210,000

Marketable securities

120,000

Accounts receivable (net) 110,000 Inventory

160,000

Accounts payable

200,000

Determine (a) the current ratio and (b) the quick ratio. Round your answers to one decimal place.

✔ a. Current ratio 3

✔ b. Quick ratio 2.2 Feedback

Check My Work

a. Divide current assets by current liabilities. b. Divide quick assets by current liabilities. Quick assets are cash, temporary investments, and receivables. Learning Objective 3.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Accounts Receivable Analysis A company reports the following: Sales

$3,150,000

Average accounts receivable (net)

210,000

Determine (a) the accounts receivable turnover and (b) the number of days' sales in receivables. Round interim calculations to the nearest dollar and final answers to one decimal place. Assume a 365-day year.

✔ a. Accounts receivable turnover 15

✔ b. Number of days' sales in receivables 24.3 days Feedback

Check My Work

a. Divide sales by average accounts receivable. b. Divide average accounts receivable by average daily sales. Average daily sales are Sales divided by 365 days. Learning Objective 3.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Long-Term Solvency Analysis The following information was taken from Charu Company's balance sheet: Fixed assets (net)

$860,000

Long-term liabilities

200,000

Total liabilities

600,000

Total stockholders’ equity

250,000

Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. If required, round your answers to one decimal place.

✔ a. Ratio of fixed assets to long-term liabilities 4.3

✔ b. Ratio of liabilities to stockholders' equity 2.4 Feedback

Check My Work

a. Divide fixed assets (net) by long-term liabilities. b. Divide total liabilities by total stockholders' equity. Learning Objective 4.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Return on total assets A company reports the following income statement and balance sheet information for the current year: Net income Interest expense

$410,000 90,000

Average total assets 5,000,000 Determine the return on total assets. (Round percentages to one decimal place.)

✔ 10 %

Feedback

Check My Work

Divide the sum of net income plus interest expense by average total assets. Learning Objective 5.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Common Stockholders' Profitability Analysis A company reports the following: Net income Preferred dividends

$1,000,000 50,000

Average stockholders' equity

6,250,000

Average common stockholders' equity

3,800,000

Determine (a) the return on stockholders’ equity and (b) the return on common stockholders’ equity. (Round percentages to one decimal place.)

✔ a. Return on stockholders’ equity

16 %

✔ b. Return on common stockholders’ equity 25 % Feedback

Check My Work

a. Divide net income by average stockholders' equity. b. Divide net income minus preferred dividends by average common stockholders' equity. Learning Objective 5.

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10/16/2020

CengageNOWv2 | Online teaching and learning resource from Cengage Learning

Earnings per Share and Price-Earnings Ratio A company reports the following: Net income Preferred dividends Shares of common stock outstanding Market price per share of common stock

$410,000 $60,000 50,000 $84

a. Determine the company's earnings per share on common stock.

✔

$ 7

b. Determine the company's price-earnings ratio.

✔ 12

Feedback

Check My Work

a. Divide net income minus preferred dividends by common shares outstanding. b. Divide the common market share price by the common earnings per share. Learning Objective 5.

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