Question 1

Birch Ltd had the following comparative current assets and current liabilities:
  During 2020, credit sales and cost of sales were $450,000 and $250,000, respectively. Net cash provided by operating activities for 2020 was $134,000.
Compute the following liquidity measures for 2020:
1. Current ratio
2. Quick ratio
3. Current cash debt coverage
4. Receivables turnover
5. Inventory turnover

Accepted Answer

The answer of Birch Ltd had the following comparative current...

Question 2

The income statement for the Yarrah Ltd for the year ended 31 December 2020 appears below.
  *Includes $30,000 of interest expense and $16,000 of income tax expense.
Additional information:
1. Ordinary shares outstanding on 1 January 2020 was 50,000 shares. On 1 July 2020
10,000 more shares were issued.
2. The market price of Yarrah shares was $12 at the end of 2020.
3. Cash dividends of $30,000 were paid, $6,000 of which were paid to preferred shareholders.
Compute the following ratios for 2020:
(a) earnings per share
(b) price-earnings ratio
(c) times interest earned.

Accepted Answer

The answer of The income statement for the Yarrah Ltd...

Question 3

Complete the following statements:
-If the inventory turnover ratio is 5 times, and the average inventory was $600,000, the cost of goods sold during the year was $______________ and the average days to sell the inventory was ______________ days.

Accepted Answer

The answer of Complete the following statements:
-If the inventory turnover...

Question 4

Complete the following statements:
-Hansen Company reported profit for the year of $300,000 and profit margin of 25%. If total average assets were $200,000, the asset turnover ratio was ____________ times.

Accepted Answer

The answer of Complete the following statements:
-Hansen Company reported profit...

Question 5

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Cash return on sales ratio

Accepted Answer

The cash return on sales ratio is a measure of a company's efficiency in generating profit from its sales, making it a profitability ratio.

Question 6

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Return on assets

Accepted Answer

Return on assets (ROA) is a profitability ratio that measures how efficiently a company can manage its assets to produce profits during a period.

Question 7

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Receivables turnover

Accepted Answer

Receivables turnover is a liquidity ratio because it measures how quickly a company can convert its accounts receivable into cash over a period.

Question 8

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Current cash debt coverage

Accepted Answer

The current cash debt coverage ratio is a liquidity ratio because it measures a company's ability to cover its current liabilities with cash generated from its operating activities.

Question 9

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Acid-test ratio (Quick ratio)

Accepted Answer

The Acid-test ratio, also known as the Quick ratio, is a liquidity ratio. It measures a company's ability to pay off its current liabilities with its most liquid assets, thus assessing its short-term financial health.

Question 10

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Debt to total assets ratio

Accepted Answer

The debt to total assets ratio is a solvency ratio, as it measures a company's ability to pay its long-term debts by comparing its total debt to its total assets.

Question 11

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio:
-Inventory turnover

Accepted Answer

Inventory turnover is considered a liquidity ratio because it measures how quickly a company can convert its inventory into cash or sales.

Question 12

Communication: Fast Express specialises in the transportation of medical equipment and laboratory specimens overnight. The company has selected the following information from its most recent annual report to be the subject of an immediate press release.
• The financial statements are being released.
• Profit this year was $2.1 million. Last year's profit had been $1.8 million.
• The current ratio has changed to 2:1 from last year's 1.5:1.
• The debt/total assets ratio has changed to 4:5 from last year's 3:5.
• The company expanded its truck fleet substantially by purchasing ten new delivery vans.
• The company already had twelve delivery vans. The company is now the largest medical courier on the Eastern seaboard.
Required: Prepare a brief press release incorporating the information above. Include all information. Think carefully which information (if any) is good news for the company, and which (if any) is bad news.

Accepted Answer

The answer of Communication: Fast Express specialises in the transportation...

Quiz 12: Financial Statement Analysis and Decision Making

Complete the following statements: -If the inventory turnover ratio is 5 times, and the average inventory was $600,000, the cost of goods sold during the year was $ and the average days to sell the inventory was days.

Complete the following statements: -Hansen Company reported profit for the year of $300,000 and profit margin of 25%. If total average assets were $200,000, the asset turnover ratio was ____________ times.

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Cash return on sales ratio

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Return on assets

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Receivables turnover

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Current cash debt coverage

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Acid-test ratio (Quick ratio)

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Debt to total assets ratio

For each of the ratios listed , select the appropriate code letter, whether it is a liquidity ratio, a profitability ratio or a solvency ratio: -Inventory turnover