Accounting: What the Numbers Mean 11th Edition by Wayne McManus,Daniel Viele,David Marshall

تمرين 20

Capstone analytical review of Chapters 2-4. Calculate liquidity and profitability measures and explain various financial statement relationships for an excavation contractor Gerrard Construction Co. is an excavation contractor. The following summarized data (in thousands) are taken from the December 31, 2016, financial statements:

At December 31, 2015, total assets were $164,000 and total stockholders' equity was $65,200. There were no changes in notes payable or paid-in capital during 2016.
Required:
a. The cost of services provided amount includes all operating expenses (selling, general, and administrative expenses) except depreciation expense. What do you suppose the primary reason was for management to separate depreciation from other operating expenses? From a conceptual point of view, should depreciation be considered a "cost" of providing services?
b. Why do you suppose the amounts of depreciation expense and interest expense are so high for Gerrard Construction Co.? To which specific balance sheet accounts should a financial analyst relate these expenses?
c. Calculate the company's average income tax rate. (Hint: You must first determine the earnings before taxes.)d. Explain why the amount of income tax expense is different from the amount of income taxes payable.
e. Calculate the amount of total current assets. Why do you suppose this amount is so low, relative to total assets?
f. Why doesn't the company have a Merchandise Inventory account?
g. Calculate the amount of working capital and the current ratio at December 31, 2016. Assess the company's overall liquidity.
h. Calculate ROI (including margin and turnover) and ROE for the year ended December 31, 2016. Assess the company's overall profitability. What additional information would you like to have to increase the validity of this assessment?
i. Calculate the amount of dividends declared and paid during the year ended December 31, 2016. (Hint: Do a T-account analysis of retained earnings.)