Ac 202

Topics: Financial ratios, Financial ratio, Balance sheet Pages: 4 (346 words) Published: August 25, 2013
Problem 17-4A

1.Current ratio

= 3.9 to 1

2.Acid-test ratio

= 2.3 to 1

3.Days' sales uncollected

x 365 = 33.2 days

4.Inventory turnover

= 7.2 times

5.Days’ sales in inventory

x 365 = 49.6 days

6.Debt-to-equity ratio

($16,500 + $2,200 + $2,300 + $62,400) / ($90,000 + $59,800) = 0.56 to 1

7.Times interest earned

$66,950 / $3,100 = 21.6 times

8.Profit margin ratio

= 13.8%

Problem 17-4A (Concluded)

9.Total asset turnover

= 1.7 times

10.Return on total assets

= 23.1%

11.Return on common stockholders' equity

= 35.4%

Problem 17-5A
Part 1
Ryan CompanyPriest Company
a. Current ratio

= 2.5 to 1= 2.5 to 1

b. Acid-test ratio

= 1.0 to 1= 1.0 to 1

c. Accounts receivable turnover

= 18.0 times = 13.5 times

d. Inventory turnover

= 7.0 times = 4.5 times

e. Days’ sales in inventory

x 365 = 62.8 days x 365 = 90.1 days

f. Days' sales uncollected

x 365 = 24.6 days x 365 = 29.3 days

Short-term credit risk analysis: Ryan and Priest have essentially equal current ratios and equal acid-test ratios. However, Ryan both turns its merchandise and collects its accounts receivable more rapidly than does Priest. On this basis, Ryan probably is the better short-term credit risk.

Problem 17-5A (Concluded)
Part 2
Ryan CompanyPriest Company

a. Profit margin ratio

= 10.3% = 13.5%

b. Total asset turnover

= 1.6 times = 1.7 times

c. Return on total assets

= 16.5% = 23.1%

d. Return on common stockholders' equity

= 24.0% = 32.8%

e. Price-earnings ratio

= 12.9 = 9.8

f. Dividend yield...
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