ACC 308 (1)
.docx
keyboard_arrow_up
School
Southern New Hampshire University *
*We aren’t endorsed by this school
Course
308
Subject
Accounting
Date
Apr 3, 2024
Type
docx
Pages
3
Uploaded by ChiefBarracudaPerson994 on coursehero.com
Jennifer Baker
Management Financial Brief
Financial Health
The company as a whole is doing well. An increase of the current ratio of .6 from 5.18 in 2016 to
5.78 in 2017 shows the company has more than five times the number of assets to cover the liabilities. Sometimes, the significant coverage of liabilities would be concerning as it can indicate that management is not utilizing its assets to the best of its ability and profitability for the company. However, in this case, the return on assets is over 100%, which shows that management is making intelligent choices since the company’s net income was slightly greater than its total assets. The company has been profitable based on the gross margin, return on sales, return on equity, and return on assets for 2017, as seen on the ratios tab. Ratio Analysis
Alone, each ratio will tell a slightly different story, but together, they show a relatively accurate depiction of how well the company is performing. When comparing the 2017 ratios to the previous year, we see an increase in current and quick ratios. Although the liabilities did increase, they did not do so at a higher rate than the assets, which explains the increase in both the current and quick ratios. Assuming customers are making more frequent payments, that would be the reason the account receivable turnover has also increased. The company’s efficiency in the most recent year would explain the increase in the gross margin and return on sales because of its additional profit.
Compounding Interest for Future Money
In the future, the company will have a couple of liabilities coming to term at different times. For instance, the 6% interest note payable does not specify repayment terms only that it needs to be repaid within 2 years. It does not look as though the interest on this note is compounding, so there will be no benefit in paying it off early since the interest will remain the same. On the contrary is the 5-year loan the company took out that has a 7.5% annual interest rate, compounding each year. When it comes to compounding interest, the company should focus
on paying off the liability to avoid more interest on that amount in the future. Regulations and Ethical Reporting
Since the company uses LIFO, the inventory amount impacts depending on when the company started using that method and the older cost of purchasing goods the company still has left in inventory. To ensure the company stays within the regulations, all companies must follow the rules when reporting their finances to clarify for investors or anyone. For that matter, notes should be included in any areas needing clarification. Such notes could consist of depreciation methods, inventory methods, and long-term debt. The GAAP requires a set of financial statements that every company needs to submit. For instance, the GAAP requires a company to create a Statement of Cash Flows to show how the cash flows, meaning where it is going and where it came from. That amount is carried over onto the balance sheet. The final cash amount can only be listed on the balance sheet, with the Cash Flow showing the process during the accounting cycle.
Your preview ends here
Eager to read complete document? Join bartleby learn and gain access to the full version
- Access to all documents
- Unlimited textbook solutions
- 24/7 expert homework help
Related Questions
Computing and Interpreting Financial Statement Ratios
Following are selected ratios of Norfolk Southern for 2018 and 2017.
Return on Assets (ROA) Component
2018
2017
Profitability (Net income/Sales)
24.3%
52.2%
Productivity (Sales/Average assets)
0.328
0.309
a. Was the company profitable in 2018?AnswerYesNo
b. Was the company more profitable in 2018 or 2017?Answer20172018
c. Is the change in productivity a positive or negative development?AnswerPositiveNegative
d. Compute the company’s ROA for 2018 and for 2017.Note: Round answers to one decimal places (example: 10.4%).
ROA
2018
Answer
2017
Answer
arrow_forward
Question # 5:
You are a financial manager in Gama Corporation. You have the task of getting the company back into a sound financial position. Gama Corporation’s 2017 and 2018 balance sheets and income statements, together with projections for 2019, are shown in the following tables. The tables also show the 2017 and 2018 financial ratios, along with the industry average data. Your assignment is to answer the following questions. Provide clear explanations, not yes or no answers. Show your work for the calculations.
Balance Sheets
Assets
2017
2018
2019 (Projected)
Cash
$ 9,000
$ 7,282
$ 14,000
Short-Term Investments.
48,600
20,000
71,632
Accounts Receivable
351,200
632,160
878,000
Inventories
715,200
1,287,360
1,716,480
Total Current Assets
$ 1,124,000
$ 1,946,802
$ 2,680,112
Gross Fixed Assets
491,000…
arrow_forward
Find online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2015 (filed in October 2015).
a. Compute Costco's net profit margin, total asset turnover, and equity multiplier.
b. Verify the DuPont Identity for Costco's ROE.
c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be?
a. Compute Costco's net profit margin, total asset turnover, and equity multiplier.
The net profit margin is
%. (Round to two decimal places.)
The total asset turnover is
(Round to two decimal places.)
The equity multiplier is
(Round to two decimal places.)
b. Verify the DuPont Identity forCostco's ROE.
The ROE is %. (Round to two decimal places.)
c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be?
The total assets turnover should be
(Round to two decimal places.)
The total asset turnover should be
%
(Round to two decimal places and…
arrow_forward
Case Study Questions
What was the total postpaid revenue in 2017?
What was the total net profit in 2017?
Identify examples of strategies adopted by MAXIS in that year.
How were the above strategies related to their Customer Relationship Management (CRM) and future sale?
arrow_forward
17
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 35 percent increase in sales next year, and management is concerned about the company's need for external funds.
The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset
utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends.
Income Statement:
Cash
Accounts receivable.
Inventory
Fixed assets
Assets
Current assets
Total assets
The firm
$230,000
168,500
$ 61,500
9,500
$ 52,000
17,500
$ 34,500
$ 13,800
Balance Sheet
Liabilities and Stockholders' Equity
$6,500
42,000 Accrued wages
55,000
Accrued taxes
$ 103,500
90,000
Accounts payable
Current liabilities
Notes payable
Long-term debt
Common stock
Retained…
arrow_forward
Computing and Interpreting Financial Statement Ratios
Following are selected ratios of Norfolk Southern for 2018 and 2017.
Return on Assets (ROA) Component
2018
2017
Profitability (Net income/Sales)
25.3%
53.2%
Productivity (Sales/Average assets)
0.338
0.319
a. Was the company profitable in 2018?Answer
b. Was the company more profitable in 2018 or 2017?Answer
c. Is the change in productivity a positive or negative development?Answer
d. Compute the company’s ROA for 2018 and for 2017.
Note: Round answers to one decimal places (example: 10.4%).
ROA
2018
Answer
2017
Answer
e. From the information provided, which of the following best explains the change in ROA during 2018?
Answer
arrow_forward
A company has been in business for a number of years. Merkel has the following financial ratios:
return on equity (ROE) = 85%Net profit margin= 19%total asset turnover= 4.9earnings quality= 0.5debt-to-equity ratio= 4.2
question:
Prepare an analysis of this company. Discuss and interpret the financial ratios above. what at the strengths AND weaknesses of the company? are there any troubling signs?
arrow_forward
Over the past year, Stop-n’-Shop has realized an increase in its current ratio and a drop in itstotal assets turnover ratio. However, the firm’s sales revenues, quick ratio, and fixed assetsturnover ratio have remained constant. What might explain these changes?
arrow_forward
performance of National Company. Comment on overall financial position and financial health of the business. Identify problems and recommend
possible solutions, if historical ratios of company are: (
Ratios
2017
2018
2019
Current Ratio
1.4
1.5
1.6
Acid Test Ratio
0.85
0.74
0.63
Asset Turnover Ratio
4 times
3.2
2.5
Inventory Turnover Ratio
6 times
5.5
Collection Period
6 times
5.5
5
arrow_forward
This is the operating margin from 2015 to 2019:
2015: 23.33%
2016: 15.69%
2017: 18.15%
2018: 25.06%
2019: 16.82%
What is the trend analysis for the operating margin ratio above? In general, why the operating margin of a company become decrease and increase?
arrow_forward
a. The following information from a business article titled, “PLDT cuts full-year profit forecast after third-quarter results disappoint” was posted on Interaksyon.com (Date accessed: March 11, 2015) on November 4, 2014. From the article, PLDT management reported that PLDT’s 2014 third-quarter net income was down to P7.9 billion in the same period in 2013.
“Our third quarter results reflect intensifying competition in the cellular space of our business, to which we have taken measures to respond to competition and stabilize our share of market. Smart, Sun and Talk N’ Text undertook to match or neutralize price aggression on the prepaid front, effectively lowering price points for the same level of activity”, “Manuel V. Pangilinan*, PLDT Chairman said*.”
“Based on this market assessment and on the information available to the company, PLDT is revising its profit guidance for the full-year to P37 billion from the P39.5 billion previously disclosed,” Mr. Pangilinan said.
Question:…
arrow_forward
Computing and Interpreting Financial Statement Ratios
Following are selected ratios of Colgate-Palmolive for 2015 and 2014.
Return on Assets(ROA) Component 2015
2014
Profitability (Net income/Sales)
7.80% 11.30%
Productivity (Sales/Average assets)
1.37
1.28
a. Was the company profitable in 2015? What evidence do you have of this?
ONo, Colgate-Palmolive was not profitable as evidenced by its decrease in its net profit margin.
OYes, Colgate-Palmolive was profitable as evidenced by its positive net profit margin.
b. Is the change in productivity (asset turnover) a positive development?
ONo, the increase indicates more operating assets were needed to generate the same level of sales as the prior year.
OYes, the increase indicates that operating assets generated a higher level of sales than the prior year.
c. Compute the company's ROA for 2015.
Round answer to one decimal place (ex: 0.2345 = 23.5%).
arrow_forward
Balance Sheet
Beginning
Balance
Ending Balance
Assets
$ 131,000
334,000
579,000
786,000
401,000
255,000
$ 2,486,000
$ 126,000
480,000
483,000
781,000
435,000
251,000
$ 2,556,000
Cash
Accounts receivable
Inventory
Plant and equipment, net
Investment in Buisson, S.A.
Land (undeveloped)
Total assets
Liabilities and Stockholders' Equity
Accounts payable
Long-term debt
Stockholders' equity
$381,000
1,020,000
1,085,000
$ 2,486,000
$ 347,000
1,020,000
1,189,000
$ 2,556,000
Total liabilities and stockholders' equity
Joel de Paris, Incorporated
Income Statement
$ 4,255,000
3,489,100
765,900
Sales
Operating expenses
Net operating income
Interest and taxes:
$ 116,000
199,000
Interest expense
Тах еxpense
315,000
$ 450,900
Net income
The company paid dividends of $346,900 last year. The "Investment in Buisson, S.A.," on the balance sheet
represents an investment in the stock of another company. The company's minimum required rate of return of
15%.
arrow_forward
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 30 percent increase in sales next year, and management is concerned about the company's need for external funds.
The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset
utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Income Statement
Sales
$220,000
158,000
$ 62,000
9,400
$ 52,600
17,400
$ 35,200
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Тахes
Earnings after taxes
Dividends
$ 8,800
Balance Sheet
Assets
Liabilities and Stockholders' Equity
$ 5,000
61,000 Accrued wages
77,000 Accrued taxes
Cash
$
Accounts payable
$ 25,700
Accounts receivable
2,400
4,900
$ 33,000
9,400
Inventory
$143,000
89,000 Notes payable
Current assets
Current liabilities
Fixed assets
Long-term debt
Common stock…
arrow_forward
Over the past year, M.D. Ryngaert & Co. has realized an increase in its current ration and a drop in its total assets turnover ratio. However, the company’s sales, quick ration, and fixed assets turnover ratio have remained constant. What explains these changes?
arrow_forward
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 30 percent increase in sales next year, and management is concerned about the company's need for external funds.
The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset
utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends
Cash
Accounts receivable
Inventory
Current assets
Fixed assets
Income Statement
Total assets
Assets
$ 280,000
222,800
$ 57,200
7,800
$ 49,400
15,800
$ 33,600
$ 6,720
Balance Sheet (in $ millions)
Liabilities and Stockholders' Equity
$ 5,000 Accounts payable
Accrued wages
86,000
77,000
Accrued taxes
$ 168,000
88,000
Current liabilities
Notes payable
Long-term debt
Common stock
Retained…
arrow_forward
The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm
is expecting a 30 percent increase in sales next year, and management is concerned about the company's need for external funds.
The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset
utilization in the existing store. Among liabilities, only current liabilities vary directly with sales.
Sales
Expenses
Earnings before interest and taxes
Interest
Earnings before taxes
Taxes
Earnings after taxes
Dividends
Current assets
Income Statement
Cash
Accounts receivable
Inventory
Fixed assets
Total assets
Assets
The firm
$ 250,000
184,800
$ 65,200
8,600
$ 56,600
16,600
$ 40,000
$ 16,000
Balance Sheet (in $ millions)
$ 221,000
Liabilities and Stockholders' Equity
$ 4,000 Accounts payable
Accrued wages
53,000
68,000
Accrued taxes
$ 125,000
96,000
Current liabilities
Notes payable
Long-term debt…
arrow_forward
SEE MORE QUESTIONS
Recommended textbooks for you
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning
Related Questions
- Computing and Interpreting Financial Statement Ratios Following are selected ratios of Norfolk Southern for 2018 and 2017. Return on Assets (ROA) Component 2018 2017 Profitability (Net income/Sales) 24.3% 52.2% Productivity (Sales/Average assets) 0.328 0.309 a. Was the company profitable in 2018?AnswerYesNo b. Was the company more profitable in 2018 or 2017?Answer20172018 c. Is the change in productivity a positive or negative development?AnswerPositiveNegative d. Compute the company’s ROA for 2018 and for 2017.Note: Round answers to one decimal places (example: 10.4%). ROA 2018 Answer 2017 Answerarrow_forwardQuestion # 5: You are a financial manager in Gama Corporation. You have the task of getting the company back into a sound financial position. Gama Corporation’s 2017 and 2018 balance sheets and income statements, together with projections for 2019, are shown in the following tables. The tables also show the 2017 and 2018 financial ratios, along with the industry average data. Your assignment is to answer the following questions. Provide clear explanations, not yes or no answers. Show your work for the calculations. Balance Sheets Assets 2017 2018 2019 (Projected) Cash $ 9,000 $ 7,282 $ 14,000 Short-Term Investments. 48,600 20,000 71,632 Accounts Receivable 351,200 632,160 878,000 Inventories 715,200 1,287,360 1,716,480 Total Current Assets $ 1,124,000 $ 1,946,802 $ 2,680,112 Gross Fixed Assets 491,000…arrow_forwardFind online the annual 10-K report for Costco Wholesale Corporation (COST) for fiscal year 2015 (filed in October 2015). a. Compute Costco's net profit margin, total asset turnover, and equity multiplier. b. Verify the DuPont Identity for Costco's ROE. c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be? a. Compute Costco's net profit margin, total asset turnover, and equity multiplier. The net profit margin is %. (Round to two decimal places.) The total asset turnover is (Round to two decimal places.) The equity multiplier is (Round to two decimal places.) b. Verify the DuPont Identity forCostco's ROE. The ROE is %. (Round to two decimal places.) c. If Costco's managers wanted to increase its ROE by 1 percentage point, how much higher would their asset turnover need to be? The total assets turnover should be (Round to two decimal places.) The total asset turnover should be % (Round to two decimal places and…arrow_forward
- Case Study Questions What was the total postpaid revenue in 2017? What was the total net profit in 2017? Identify examples of strategies adopted by MAXIS in that year. How were the above strategies related to their Customer Relationship Management (CRM) and future sale?arrow_forward17 The Manning Company has financial statements as shown next, which are representative of the company's historical average. The firm is expecting a 35 percent increase in sales next year, and management is concerned about the company's need for external funds. The increase in sales is expected to be carried out without any expansion of fixed assets, but rather through more efficient asset utilization in the existing store. Among liabilities, only current liabilities vary directly with sales. Sales Expenses Earnings before interest and taxes Interest Earnings before taxes Taxes Earnings after taxes Dividends. Income Statement: Cash Accounts receivable. Inventory Fixed assets Assets Current assets Total assets The firm $230,000 168,500 $ 61,500 9,500 $ 52,000 17,500 $ 34,500 $ 13,800 Balance Sheet Liabilities and Stockholders' Equity $6,500 42,000 Accrued wages 55,000 Accrued taxes $ 103,500 90,000 Accounts payable Current liabilities Notes payable Long-term debt Common stock Retained…arrow_forwardComputing and Interpreting Financial Statement Ratios Following are selected ratios of Norfolk Southern for 2018 and 2017. Return on Assets (ROA) Component 2018 2017 Profitability (Net income/Sales) 25.3% 53.2% Productivity (Sales/Average assets) 0.338 0.319 a. Was the company profitable in 2018?Answer b. Was the company more profitable in 2018 or 2017?Answer c. Is the change in productivity a positive or negative development?Answer d. Compute the company’s ROA for 2018 and for 2017. Note: Round answers to one decimal places (example: 10.4%). ROA 2018 Answer 2017 Answer e. From the information provided, which of the following best explains the change in ROA during 2018? Answerarrow_forward
- A company has been in business for a number of years. Merkel has the following financial ratios: return on equity (ROE) = 85%Net profit margin= 19%total asset turnover= 4.9earnings quality= 0.5debt-to-equity ratio= 4.2 question: Prepare an analysis of this company. Discuss and interpret the financial ratios above. what at the strengths AND weaknesses of the company? are there any troubling signs?arrow_forwardOver the past year, Stop-n’-Shop has realized an increase in its current ratio and a drop in itstotal assets turnover ratio. However, the firm’s sales revenues, quick ratio, and fixed assetsturnover ratio have remained constant. What might explain these changes?arrow_forwardperformance of National Company. Comment on overall financial position and financial health of the business. Identify problems and recommend possible solutions, if historical ratios of company are: ( Ratios 2017 2018 2019 Current Ratio 1.4 1.5 1.6 Acid Test Ratio 0.85 0.74 0.63 Asset Turnover Ratio 4 times 3.2 2.5 Inventory Turnover Ratio 6 times 5.5 Collection Period 6 times 5.5 5arrow_forward
- This is the operating margin from 2015 to 2019: 2015: 23.33% 2016: 15.69% 2017: 18.15% 2018: 25.06% 2019: 16.82% What is the trend analysis for the operating margin ratio above? In general, why the operating margin of a company become decrease and increase?arrow_forwarda. The following information from a business article titled, “PLDT cuts full-year profit forecast after third-quarter results disappoint” was posted on Interaksyon.com (Date accessed: March 11, 2015) on November 4, 2014. From the article, PLDT management reported that PLDT’s 2014 third-quarter net income was down to P7.9 billion in the same period in 2013. “Our third quarter results reflect intensifying competition in the cellular space of our business, to which we have taken measures to respond to competition and stabilize our share of market. Smart, Sun and Talk N’ Text undertook to match or neutralize price aggression on the prepaid front, effectively lowering price points for the same level of activity”, “Manuel V. Pangilinan*, PLDT Chairman said*.” “Based on this market assessment and on the information available to the company, PLDT is revising its profit guidance for the full-year to P37 billion from the P39.5 billion previously disclosed,” Mr. Pangilinan said. Question:…arrow_forwardComputing and Interpreting Financial Statement Ratios Following are selected ratios of Colgate-Palmolive for 2015 and 2014. Return on Assets(ROA) Component 2015 2014 Profitability (Net income/Sales) 7.80% 11.30% Productivity (Sales/Average assets) 1.37 1.28 a. Was the company profitable in 2015? What evidence do you have of this? ONo, Colgate-Palmolive was not profitable as evidenced by its decrease in its net profit margin. OYes, Colgate-Palmolive was profitable as evidenced by its positive net profit margin. b. Is the change in productivity (asset turnover) a positive development? ONo, the increase indicates more operating assets were needed to generate the same level of sales as the prior year. OYes, the increase indicates that operating assets generated a higher level of sales than the prior year. c. Compute the company's ROA for 2015. Round answer to one decimal place (ex: 0.2345 = 23.5%).arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage Learning
- Intermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
Financial Accounting: The Impact on Decision Make...
Accounting
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Cengage Learning
Intermediate Financial Management (MindTap Course...
Finance
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Cengage Learning