Financial Accounting (12th Edition) (What's New in Accounting)
12th Edition
ISBN: 9780134725987
Author: C. William Thomas, Wendy M. Tietz, Walter T. Harrison Jr.
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Textbook Question
Chapter 10, Problem 10.35AE
LO 5
(Learning Objective 5: Calculate and interpret ratios) Data from the financial statements of Eclectic Candle Company included the following:
Average total assets.................................................................... | $50,000 |
Average common stockholders’ equity........................................ | 20,000 |
Net sales.................................................................................... | 100,000 |
Net income.................................................................................. | 7,500 |
The company had no
Requirements
- 1. Calculate the following ratios:
- a. Net profit margin
- b. Asset turnover ratio
- c. Leverage ratio
- d. Return on assets (ROA)
- e. Return on equity (ROE)
- 2. Which is higher, ROA or ROE? Does this make sense for stockholders? Why or why not?
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
Trouble Company has provided the following data:
Sales........................................................... $5,000,000
Interest expense......................................... $30,000
Total assets, beginning of year .................. $185,000
Total assets, end of year ............................ $215,000
Tax rate ...................................................... 30%
Return on total assets ................................. 15.5%
Tribble Company's net income was:
A) $1,000 C) $22,000
B) $31,000 D) $10,000
Using the financial statements of Sultan Center in 2018, calculate the following ratios and interpret your results:
current ratio
calculations
........................
interpretation of results
.......................
return on equity ratio
calculations
.......................
interpretation of results
......................
profit margin
calculations
.........................
interpretation of results
...........................
debt to equity ratio
calculations
............................
interpretation of results
............................
(financial statements listed below and also company website for more information)
https://cis.boursakuwait.com.kw/Portal/FData/610_BL_2019_9_E_293202094434260.pdf
(Learning Objective 7: Calculate return on assets) Hometown Supply Companyreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$84,000$ 4,200$70,000$82,600$ 4,050$69,450Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?
Chapter 10 Solutions
Financial Accounting (12th Edition) (What's New in Accounting)
Ch. 10 - The two main categories of stockholders equity are...Ch. 10 - Prob. 2QCCh. 10 - Stockholders of a corporation directly elect the...Ch. 10 - The par value of a share of common stock a. is...Ch. 10 - Prob. 5QCCh. 10 - If a corporation issues 1,000 shares of 1 par...Ch. 10 - Prob. 7QCCh. 10 - Sandusky Corporation purchased 3,000 shares of its...Ch. 10 - Graves Corporation issued 50,000 shares of 1 par...Ch. 10 - Prob. 10QC
Ch. 10 - For cash dividends, the journal entry on the date...Ch. 10 - Prob. 12QCCh. 10 - Prob. 13QCCh. 10 - Prob. 14QCCh. 10 - Prob. 15QCCh. 10 - Prob. 16QCCh. 10 - Prob. 10.1ECCh. 10 - Prob. 10.1SCh. 10 - (Learning Objective 1: Describe characteristics of...Ch. 10 - Prob. 10.3SCh. 10 - Prob. 10.4SCh. 10 - (Learning Objective 2: Record issuance of stock...Ch. 10 - Prob. 10.6SCh. 10 - Prob. 10.7SCh. 10 - Prob. 10.8SCh. 10 - Prob. 10.9SCh. 10 - Prob. 10.10SCh. 10 - (Learning Objective 4: Divide cash dividends...Ch. 10 - Prob. 10.12SCh. 10 - (Learning Objective 6: Prepare the stockholders...Ch. 10 - (Learning Objective 5: Use stockholders equity...Ch. 10 - (Learning Objective 5: Calculate book value per...Ch. 10 - (Learning Objective 5: Calculate and explain...Ch. 10 - (Learning Objective 5: Calculate return on assets...Ch. 10 - Prob. 10.18SCh. 10 - (Learning Objective 2. 5: Define and use various...Ch. 10 - Prob. 10.20SCh. 10 - Prob. 10.21SCh. 10 - Prob. 10.22SCh. 10 - (Learning Objective 1: Identify key terms...Ch. 10 - (Learning Objectives 2, 6: Account for issuance of...Ch. 10 - Prob. 10.25AECh. 10 - Prob. 10.26AECh. 10 - Prob. 10.27AECh. 10 - (Learning Objective 3: Account for the purchase...Ch. 10 - (Learning Objectives 2, 3, 4: Account for issuance...Ch. 10 - (Learning Objective 6: Report stockholders equity...Ch. 10 - Prob. 10.31AECh. 10 - LO 4 (Learning Objective 4: Calculate dividends on...Ch. 10 - Prob. 10.33AECh. 10 - Prob. 10.34AECh. 10 - LO 5 (Learning Objective 5: Calculate and...Ch. 10 - LO 4,6 (Learning Objective 4, 6: Analyze...Ch. 10 - (Learning Objective 5: Evaluate profitability)...Ch. 10 - Prob. 10.38AECh. 10 - LO 6 (Learning Objective 6: Use a companys...Ch. 10 - (Learning Objective 1: Identify key terms...Ch. 10 - (Learning Objectives 2, 6: Account for issuance of...Ch. 10 - Prob. 10.42BECh. 10 - Prob. 10.43BECh. 10 - (Learning Objectives 3, 6: Show how treasury stock...Ch. 10 - (Learning Objective 3: Account for the purchase...Ch. 10 - (Learning Objectives 2, 3, 4: Account for issuance...Ch. 10 - Prob. 10.47BECh. 10 - Prob. 10.48BECh. 10 - Prob. 10.49BECh. 10 - Prob. 10.50BECh. 10 - (Learning Objectives 2, 3, 4: Measure the effect s...Ch. 10 - Prob. 10.52BECh. 10 - (Learning Objective 5: Analyze alternative plans...Ch. 10 - (Learning Objective 5: Evaluate profitability)...Ch. 10 - Prob. 10.55BECh. 10 - Prob. 10.56BECh. 10 - Prob. 10.57QCh. 10 - Prob. 10.58QCh. 10 - Prob. 10.59QCh. 10 - Prob. 10.60QCh. 10 - Prob. 10.61QCh. 10 - Prob. 10.62QCh. 10 - Prob. 10.63QCh. 10 - Prob. 10.64QCh. 10 - Quill Corporation paid 28 per share to purchase...Ch. 10 - Prob. 10.66QCh. 10 - Prob. 10.67QCh. 10 - Prob. 10.68QCh. 10 - Prob. 10.69QCh. 10 - Prob. 10.70QCh. 10 - Prob. 10.71QCh. 10 - Prob. 10.72QCh. 10 - Prob. 10.73QCh. 10 - Prob. 10.74QCh. 10 - Prob. 10.75QCh. 10 - Prob. 10.76APCh. 10 - (Learning Objective 6: Report stockholders equity)...Ch. 10 - (Learning Objectives 2, 4: Analyze stockholders...Ch. 10 - (Learning Objectives 2, 3, 4: Account for stock...Ch. 10 - Prob. 10.80APCh. 10 - Prob. 10.81APCh. 10 - Prob. 10.82APCh. 10 - Prob. 10.83APCh. 10 - Prob. 10.84BPCh. 10 - Prob. 10.85BPCh. 10 - (Learning Objectives 2, 4: Analyze stockholders...Ch. 10 - (Learning Objectives 2, 3, 4: Account for stock...Ch. 10 - Prob. 10.88BPCh. 10 - Prob. 10.89BPCh. 10 - (Learning Objective 5: Differentiate financing...Ch. 10 - Prob. 10.91BPCh. 10 - Prob. 10.92CEPCh. 10 - Prob. 10.93CEPCh. 10 - Prob. 10.94CEPCh. 10 - Prob. 10.95CEPCh. 10 - (Learning Objectives 2, 3, 4, 6: Analyze...Ch. 10 - (Learning Objectives 2, 3, 4: Calculate impact of...Ch. 10 - Prob. 10.98DCCh. 10 - Prob. 10.99DCCh. 10 - Prob. 10.100EICCh. 10 - Prob. 10.101EICCh. 10 - (Learning Objectives 2, 3, 4, 5: Analyze common...Ch. 10 - (Learning Objectives 2, 3, 4: Analyze treasury...
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- The following information appeared in a company’s income statement:Sales . . . . . . . . . . . . . . . . . . . . . . . . $300,000Sales returns . . . . . . . . . . . . . . . . . . . 15,000Sales discounts . . . . . . . . . . . . . . . . . 4,500Beginning inventory . . . . . . . . . . . . . 25,000Purchases . . . . . . . . . . . . . . . . . . . . . 180,000Purchases returns and allowances . . . . 6,000Purchases discounts . . . . . . . . . . . . . 3,600Transportation-in . . . . . . . . . . . . . . . 11,000Gross profit from sales . . . . . . . . . . . 105,000Net income . . . . . . . . . . . . . . . . . . . 55,000 RequiredCalculate the (a) total operating expenses, (b) cost of goods sold, and (c) ending inventory.arrow_forwardThe following information is available for Sandy Company: Gross Profit ......................... $283,500 Sales returns ...........................70,000 Net Sales ............................. 700,000 Net income ............................ 105,000 Sandy's Cost of Goods Sold is: $ 990,500 $ 416,500 $ 245,000 $ 409,500arrow_forwardThe Longbranch Western Wear Company has the following financial statements, which are representative of the company’s historical average. Income Statement Sales............................................ $200,000 Expenses.................................... 158,000 Earnings before interest and taxes 42,000 Interest...................................... 2,000 Earnings before taxes............ 40,000 Taxes.......................................... 20,000 Earnings after taxes................ $ 20,000 Dividends.................................. $ 10,000 Balance Sheet Assets Liabilities and Shareholders’ Equity Cash.............................. $ 10,000 Accounts payable............... $ 5,000 Accounts receivable..... 10,000 Accrued wages................... 1,000 Inventory...................... 15,000 Accrued…arrow_forward
- Wiley Company’s income statement for Year 2 follows:Sales ........................................................... $150,000Cost of goods sold ...................................... 90,000Gross margin .............................................. 60,000Selling and administrative expenses ........... 40,000Income before taxes ................................... 20,000Income taxes ............................................... 8,000Net income .................................................. $ 12,000The company’s selling and administrative expense for Year 2 includes $7,500 of depreciation expense.Selected balance sheet accounts for Wiley at the end of Years 1 and 2 are as follows:Year 2 Year 1Debit Balance Accounts:Accounts receivable ..................................... $40,000 $30,000Inventory ...................................................... $54,000 $45,000Prepaid expenses ........................................ $8,000 $6,000Credit Balance Accounts:Accounts payable…arrow_forwardUse the accounts listed below to answer the questions about the profit of a business. Total Revenue ………………………………………………………………..$100,000 Hired Labor ……………………………………………………………………$25,000 Materials Purchased …………………………………………………………...$25,000 Interest that the owner could have earned on an alternative investment ……… $5,000 Income the owner could have earned by renting the firm’s building …………. $4,000 Utility Payments ………………………………………………………………..$5,000 Income the owner could have earned in an alternative business venture ……..$30,000 Cost of shipping the firm’s output to buyers ………………………………… $1,000 Identify the explicit costs incurred by this business. Why are they explicit costs? Identify the implicit costs incurred by the business. Why are they implicit costs? How much accounting profit does the firm make? Show your work. How much economic profit (loss) does this firm make? Show your work. If these financial results continue in the long run, will this firm stay in this business?arrow_forward(Learning Objective 7: Calculate return on assets) Handley Grocery Corporationreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$50,000$ 2,200$40,000$48,350$ 2,100$39,300Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?arrow_forward
- Calculate profitability measures The following information was available for the year ended December 31, 2013: Sales ....................................... $200,000Net income ............................. 30,000Average total assets ................ 500,000Average total stockholders’equity .................................. 300,000Dividends per share ................ $ 1.20Earnings per share .................. 3.00Market price per shareat year-end .......................... 48.00 Required:a. Calculate margin, turnover, and ROI for the year ended December 31, 2013.b. Calculate ROE for the year ended December 31, 2013.c. Calculate the price/earnings ratio for 2013.d. Calculate the dividend payout ratio for 2013.e. Calculate the dividend yield for 2013.arrow_forwardQuestion Description The following income statement and selected balance sheet account data are available for Treece, Inc., at December 31, 2013 Revenue: Net sales………………………………………..$3,200,000 Interest income………………………………….. . 45,000 Gain on sale of marketable securities…….………...34,000 Total revenue…………………………………..$3,279,000 Costs and expenses: Cost of goods sold…………………………………………... $1,620,000 Operating expenses (including depreciation of $150,000)….1, 240,000 Interest expense…………………………………………….…...42,000 Income taxes…………………………………………….……....100,000 Loss on sale of plant Assets.....................................................…...12,000 Total Costs and expenses…………………………..………. $3,014,000 Net income………………………………………….…………. $260,000 Changes in the Company’s balance sheet accounts over the year are summarized as follows: Accounts receivable increased by $60,000 Accrued interest receivable decreased by $2,000 Inventory decreased by $60,000, and Account payable decreased by $16,000 Short term…arrow_forwardSelected information from the accounting records of Carbine Manufacturing follows: Net sales ............................................. $2,900,000 Cost of goods sold .................................... 1,900,000 Inventories at January 1 ............................. 572,000 Inventories at December 31 ............................ 476,000 What is the number of days' sales in average inventories for the year? a. 132 b. 109 c. 101 d. 66 how do i calculate the days in inventory ?arrow_forward
- #8Aaron Moses Company prepared the tabulation below at December 31, 2020.Net Income ............................................................................................................ $500,000Adjustments to reconcile net income to net cash provided by operating activities:Depreciation expense, $63,000 ..................................................................... ______Decrease in accounts receivable, $50,000 .................................................... ______Increase in inventory, $23,000 ....................................................................... ______Increase in accounts payable, $15,300 ......................................................... ______Increase in interest receivable, $7,000 .......................................................... ______Increase in supplies, $6,000 .......................................................................... ______Decrease in income taxes payable, $7,500…arrow_forwardThe data (in thousands of dollars) were extracted from Larop Corporation's financial reports for the previous fiscal year.Sales ........................................................................................ $870 Purchases of raw materials..................................................... $190 Direct labor.............................................................................. $200 Manufacturing overhead ........................................................ $230 Administrative expenses......................................................... $150 Selling expenses...................................................................... $140 Raw materials inventory, beginning ....................................... $10 Raw materials inventory, ending ............................................ $40 Work in process inventory, beginning .................................... $20 Work in process inventory, ending ......................................... $50 Finished goods…arrow_forward(Learning Objective 7: Evaluate liquidity using the quick [acid-test] ratio and days’sales in receivables) Northern Products reported the following amounts in its 2019 financialstatements. The 2018 amounts are given for comparison.2019 2018Current assets:Cash............................................ $ 9,500Short-term investments................ 7,000Accounts receivable..................... $70,100Less: Allowance foruncollectibles.......................$86,500(7,500) (5,500) 64,600Inventory..................................... 190,000Prepaid insurance ........................ 2,200Total current assets..................... 273,300Total current liabilities.................... 106,000Net sales (all on account) ................$ 9,50010,50079,000189,0002,200290,20099,0001,077,000 734,000Requirements1. Compute Northern’s quick (acid-test) ratio at the end of 2019. Round to two decimalplaces. How does the quick ratio compare with the industry average of 0.92?2. Compare days’ sales…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education
How To Analyze an Income Statement; Author: Daniel Pronk;https://www.youtube.com/watch?v=uVHGgSXtQmE;License: Standard Youtube License