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Business
Accounting
Working capital Current ratio Quick ratio

Working capital Current ratio Quick ratio

Managerial Accounting
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PA: Measures of liquidity, solvency, and profitability The comparative financial statements of Marshall...
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  • Determine the following measures for both 20Y8 and 20Y9, rounding percentages and ratios other than per-share amounts to one decimal place. Briefly explain how or why management would use this information and comment on the trend from 20Y8 and 20Y9.
  1. Working capital
  2. Current ratio
  3. Quick ratio
  4. Accounts receivable turnover
  5. Number of days’ sales in receivables
  6. Inventory turnover
  7. Number of days’ sales in inventory
  8. Ratio of fixed assets to long-term liabilities
  9. Ratio of liabilities to stockholders’ equity
  10. Times interest earned
  11. Asset turnover
  12. Return on total assets
  13. Return on stockholders’ equity
  14. Return on common stockholders’ equity
  15. Earnings per share on common stock
  16. Price-earnings ratio
  17. Dividends per share
  18. Dividend yield

 

Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 20Y9 and 20Y8, are as follows. The market price of Rainbow Paint's common stock was $25 on December 31, 20Y9, and $30 on December 31, 20YB Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 20Y9 and 20Y8 20Y9 20Υ8 Sales..... $5,000,000 $3,200,000 Cost of merchandise sold. 3,400,000 2,080,000 $1,120,000 $ 464,000 224,000 $ 688,000 $ 432,000 Rainbow Paint Co. Gross profit....... Selling expenses....... Administrative expenses.. Total operating expenses.. Income from operations... Other revenue and expense: Other revenue.......... Other expense (interest)..... Income before income tax expense. $1,600,000 $ 650,000 325,000 $ 975,000 $ 625,000 Comparative Balance Sheet December 31, 20Y9 and 20Y8 20Υ9 20Υ8 Assets Current assets: 25,000 19,200 Cash,.... $ 175,000 $ 125,000 Temporary investments,... Accounts receivable (net)....... 150,000 425,000 (105,000) $ 545,000 (64,000) $ 387,200 50,000 325,000 Income tax expense.... 300,000 $ 245,000 176,000 Inventories,.... 720,000 480,000 Net income... $ 211,200 Prepaid expenses... 30,000 $1,500,000 20,000 $1,000,000 225,000 Total current assets.... Long-term investments,.... Property, plant, and equipment (net).. 250,000 2,093,000 1,948,000 Rainbow Paint Co. Total assets... $3,843,000 $3,173,000 Comparative Retained Earnings Statement For the Years Ended December 31, 20Y9 and 20Y8 Liabilities Current liabilities... $ 750,000 $ 650,000 20Y9 $723,000 20Y8 Long-term liabilities: Mortgage note payable, 10%, due in five years Bonds payable, 8%, due in 15 years... Total long-term liabilities,................... Retained earnings, January 1...... $581,800 $ 410,000 $4 Net income... 245,000 211,200 800,000 800,000 $ 800,000 $1,450,000 Dividends: $1,210,000 Preferred stock dividends.... (40,000) (40,000) Total liabilities,.. $1,960,000 Common stock dividends... (45,000) $883,000 (30,000) $723.000 Stockholders' Equity Retained earnings, December 31.... Preferred 8% stock, $100 par.... Common stock, $10 par.......... $ 500,000 $ 500,000 500,000 500,000 Retained earnings.... Total stockholders' equity....... Total liabilities and stockholders' equity... 883,000 723,000 $1,883,000 $1,723,000 $3,843,000 $3,173,000
Transcribed Image Text:Rainbow Paint Co.'s comparative financial statements for the years ending December 31, 20Y9 and 20Y8, are as follows. The market price of Rainbow Paint's common stock was $25 on December 31, 20Y9, and $30 on December 31, 20YB Rainbow Paint Co. Comparative Income Statement For the Years Ended December 31, 20Y9 and 20Y8 20Y9 20Υ8 Sales..... $5,000,000 $3,200,000 Cost of merchandise sold. 3,400,000 2,080,000 $1,120,000 $ 464,000 224,000 $ 688,000 $ 432,000 Rainbow Paint Co. Gross profit....... Selling expenses....... Administrative expenses.. Total operating expenses.. Income from operations... Other revenue and expense: Other revenue.......... Other expense (interest)..... Income before income tax expense. $1,600,000 $ 650,000 325,000 $ 975,000 $ 625,000 Comparative Balance Sheet December 31, 20Y9 and 20Y8 20Υ9 20Υ8 Assets Current assets: 25,000 19,200 Cash,.... $ 175,000 $ 125,000 Temporary investments,... Accounts receivable (net)....... 150,000 425,000 (105,000) $ 545,000 (64,000) $ 387,200 50,000 325,000 Income tax expense.... 300,000 $ 245,000 176,000 Inventories,.... 720,000 480,000 Net income... $ 211,200 Prepaid expenses... 30,000 $1,500,000 20,000 $1,000,000 225,000 Total current assets.... Long-term investments,.... Property, plant, and equipment (net).. 250,000 2,093,000 1,948,000 Rainbow Paint Co. Total assets... $3,843,000 $3,173,000 Comparative Retained Earnings Statement For the Years Ended December 31, 20Y9 and 20Y8 Liabilities Current liabilities... $ 750,000 $ 650,000 20Y9 $723,000 20Y8 Long-term liabilities: Mortgage note payable, 10%, due in five years Bonds payable, 8%, due in 15 years... Total long-term liabilities,................... Retained earnings, January 1...... $581,800 $ 410,000 $4 Net income... 245,000 211,200 800,000 800,000 $ 800,000 $1,450,000 Dividends: $1,210,000 Preferred stock dividends.... (40,000) (40,000) Total liabilities,.. $1,960,000 Common stock dividends... (45,000) $883,000 (30,000) $723.000 Stockholders' Equity Retained earnings, December 31.... Preferred 8% stock, $100 par.... Common stock, $10 par.......... $ 500,000 $ 500,000 500,000 500,000 Retained earnings.... Total stockholders' equity....... Total liabilities and stockholders' equity... 883,000 723,000 $1,883,000 $1,723,000 $3,843,000 $3,173,000
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