FINANCIAL ACCOUNTING
6th Edition
ISBN: 9781618533111
Author: DYCKMAN
Publisher: Cambridge Business Publishers
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Question
Chapter 1, Problem 32E
a.
To determine
Calculate the return on equity ratio of Company A for the year 2017.
b.
To determine
Compute the debt-to-equity ratio of Company A as of December 31, 2017.
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Calculation and interpretation of ratios.
Data for White Star Limited:
Net operating profit after tax is $25 million (2018: $38 million).
1. Use the information above to calculate for 2019 and 2018:
debt-to-equity ratio
return on equity ratio
earnings per share ratio.
For Financial year 2021:
Current ratio = Current assets / Current liabilities = 43.133 / 29.613 = 1.46 (2.d.p)
Debt-to-equity = Total liabilities / Total equity = (29.613 + 25.382) / 47.069 = 1.17 (2.d.p)
Return on total assets = Net profit / Average total assets = (-11.195) / 101.964 = -0.11 (2.d.p)
Profit margin ratio = Net profit / Net sales = (-11.195) / 81.79 = -0.14 (2.d.p)
Debt-to-asset = Total liabilities / Total assets = (29.613 + 25.382) / 101.964 = 0.54 (2.d.p)
Cash flow on total assets = Net cash flow from operating activities / Average total assets = 4.717 / 101.964 = 0.05 (2.d.p)
For Financial year 2022:
Current ratio = Current assets / Current liabilities = 49.476 / 32.754 = 1.51 (2.d.p)
Debt-to-equity = Total liabilities / Total equity = (32.754 + 27.625) / 46.732 = 1.29 (2.d.p)
Return on total assets = Net profit / Average total assets = (-0.336) / 107.111 = -0.003 (3.d.p)
Profit margin ratio = Net profit / Net sales = (-0.336) / 115.56 = -0.003 (3.d.p)
Debt-to-asset…
Comparative financial statement data of Garfield, Inc. follow:
Market price of Garfield’s common stock: $69.36 at December 31, 2018, and $38.04 at December 31, 2017.
Common shares outstanding: 14,000 on December 31, 2018 and 12,000 on December 31, 2017 and 2016.
All sales are on credit.
Compute the following ratios for 2018 and 2017:
2018
2017
a. Current ratio
b. Cash ratio
c. Times-interest-earned ratio
d. Inventory turnover
e. Gross profit percentage
f. Debt to equity ratio
g. Rate of return on common stockholders’ equity
h. Earnings per share of common stock
i. Price/earnings ratio
Decide (a) whether Garfield’s ability to pay debts and to sell inventory improved or deteriorated during 2018 and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.
Chapter 1 Solutions
FINANCIAL ACCOUNTING
Ch. 1 - Prob. 1MCCh. 1 - Prob. 2MCCh. 1 - Prob. 3MCCh. 1 - Prob. 4MCCh. 1 - Prob. 5MCCh. 1 - Prob. 1QCh. 1 - Prob. 2QCh. 1 - Prob. 3QCh. 1 - Prob. 4QCh. 1 - Prob. 5Q
Ch. 1 - Prob. 6QCh. 1 - Prob. 7QCh. 1 - Prob. 8QCh. 1 - Prob. 9QCh. 1 - Prob. 10QCh. 1 - Prob. 11QCh. 1 - Prob. 12QCh. 1 - Prob. 13QCh. 1 - Prob. 14QCh. 1 - Prob. 15QCh. 1 - Prob. 16QCh. 1 - Prob. 17QCh. 1 - Prob. 18QCh. 1 - Prob. 19MECh. 1 - Prob. 20MECh. 1 - Prob. 21MECh. 1 - Prob. 24MECh. 1 - Prob. 25MECh. 1 - Prob. 26MECh. 1 - Prob. 27ECh. 1 - Prob. 28ECh. 1 - Prob. 29ECh. 1 - Prob. 30ECh. 1 - Prob. 31ECh. 1 - Prob. 32ECh. 1 - Prob. 33ECh. 1 - Prob. 34ECh. 1 - Prob. 35ECh. 1 - Prob. 36PCh. 1 - Prob. 37PCh. 1 - Prob. 38PCh. 1 - Prob. 39PCh. 1 - Prob. 40PCh. 1 - Prob. 41PCh. 1 - Prob. 42PCh. 1 - Prob. 43PCh. 1 - Prob. 44PCh. 1 - Prob. 45PCh. 1 - Prob. 46CPCh. 1 - Prob. 47CPCh. 1 - Prob. 48CPCh. 1 - Prob. 49CPCh. 1 - Prob. 50CP
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