Problem The manager of the company X would like to check the evolution of Profit rate for 2 successive months. In order to adopt concrete improvement solutions, he wants to know: Exactly how much the profit rate changed during the 2 successive months The manager wants to know the exact causes of this change and the extent to which they have led to declining profit ratio More exactly he wants to know how and what are the influences of revenues, expenses and turnover on the change of this ratio Rp-Profit/Turnover *100 = (Revenues-Expenses)/Turnover *100 Revenues: R1=10,000 lei, R0= 11,000 lei
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- Your Task… Using your assigned financial statements calculate the required ratios below Indicate if the change from year to year is favorable or unfavorable. All values should be accurate to at least two decimal places. The expectation is to submit a professional report free of grammar and spelling errors and easy to read. Think of this as a menu you would be handing to a customer. All calculations are to be represented. Analysis of Profitability Gross Profit Ratio Operating Profit Ratio Net Profit Ratio Sales to Total Assets Ratio Return on Total Assets Return on Equity Earnings Per ShareAssume that a company has decided to include "employee turnover" and "residual income" as performance measures within its balance scorecard. Which of the following choices reflects management's most likely expectations regarding how these measures should change over time? A) B) C) D) Employee turnover Increase Increase Decrease Decrease Multiple Choice. O O O O Choice A Choice B Choice C Choice D Residual Income Increase Decrease Increase DecreaseWhich of the following is most likely true concerning the stability and trend of earnings? 1. require at leaset 5 years of historical data to be meaningful 2. are not factored in the analysis of revenues 3. depend on the trend of a dingle industry 4. are key factors when calculating cost of sales
- Which of the following is an example of managing earnings down? Select one: O a. Revising the estimated life of equipment from 10 years to 8 years. O b. Not writing off obsolete inventory. O c. Reducing research and development expenditures. O d. Changing estimated bad debts from 3 percent to 2.5 percent of sales.Most analysts believe which of the following is true about EPS? A. Consistent improvement in EPS year after year is the indication of continuous improvement in the companys earning power. B. Consistent improvement in EPS year after year is the indication of continuous decline in the companys earning power. C. Consistent improvement in EPS year after year is the indication of fraud within the company. D. Consistent improvement in EPS year after year is the indication that the company will never suffer a year of net loss rather than net income.Explaining why companies use performance evaluation systems Financial performance is measured in many ways. Requirements 1. Explain the difference between lag and lead indicators. 2. The following is a list of financial measures. Indicate whether each is a lag or a lead indicator: a. Income statement shows net income of $100,000 b. Listing of next week’s orders of $50,000 c. Trend showing that average hits on the redesigned Web site are increasing at 5% per week d. Price sheet from vendor reflecting that cost per pound of sugar for the next month is $2 e. Contract signed last month with large retail store that guarantees a minimum shelf space for Grandpa’s Overloaded Chocolate Cookies for the next year
- Directions: Read each sentence carefully and detemine whether the statement is TRUE or FALSE. Write your answers onthe space provided before each number. 1. Profitability ratios measure the ability of the company's assets and invested capital to generate sales. 2. Čunent ratio is generally higher than quick ratio. 3. Using anothercompany as benchmark, the company with highernet profitmarginis more profitable. 4. Accounts receivable turnover measures the number of days in the company's average collections period. 5. Firancial statement analysis uses computational and analytical techniques to evaluate the company's risks, performance, financial health, and future prospects with the objective of making economic decisions. - 6. Given equal gross profit margin, the company with the better operating income margin has higher operating expenses as a percentage of sales. 7. Debt to equity ratio measures the percentage of assets financed by equity. 8. Gross profit margin provide an indication of…Ratio analysis of a company’s performance as shown in its profit and loss account may show a decline in profit margin (gross profit as a percentage of sales revenue) compared with the previous period. Required: Give five possible reasons for a decline in gross profit as a percentage of sales revenue from one year to the next, briefly explaining for each why it has the effect of reducing the percentage. Note: You are not required to consider factors, which reduce gross profit itself, only those that reduce the gross profit percentage of sales.PROBLEM 11-17 Return on Investment (ROI) and Residual Income LO11-1, LO11-2 Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris, Inc. Balance Sheet Beginning Ending Balance Balance Assets Cash $ 140,000 $ 120,000 Accounts receivable 450,000 530,000 Inventory 320,000 380,000 Plant and equipment, net 680,000 620,000 Investment in Buisson, S.A. 280,000 170,000 250,000 Land (undeveloped) 180,000 Total assets $2,020,000 $2,100,000 Liabilities and Stockholders' Equity Accounts payable. $ 360,000 $ 310,000 Long-term debt Stockholders' equity 1,500,000 1,500,000 160,000 290,000 Total liabilities and stockholders' equity $2,020,000 $2,100,000 Joel de Paris, Inc. Income Statement Sales $4,050,000 Operating expenses Net operating income 3,645,000 405,000 Interest and taxes: Interest expense $150,000 Таx expense 110,000 260,000 Net income $ 145,000 The company paid dividends of $15,000 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an…
- 1.How is the company's financial performance based on the data? 2.What do you think are the factors affecting the number of bookings throughout the year? 3. What can you say about the company's revenue for 2020? Regardless if it's good or not, give strategic decisions that can help improve the revenue from its current status 4. What are your analysis and insights on the Financial statement.control risk, inherent risk, detection risk, RMM? Explain why? IR/CR yes or no? RMM and DR increase,decrease or no effect? Factor IR Factor CR Factor Why? Comments Impact on RMM Impact on DR 1 Apollo advanced $1.25 million to Larry Lancaster’s secretary. 2 Apollo does not have adequate documentation supporting customer returns of product. 3 Apollo has maintained a positive trend in net income over the past several years, and has a strategic emphasis on meeting profitability targets. 4 Apollo has not allowed your firm to speak with the predecessor auditor about their withdrawal after last year’s engagement. 5 Apollo installed a new computer system mid-year.Assume the company adopts your balanced scorecard. After operating for a year, some performancemeasures show improvements, but not others. What should management do next?