urrent Assets  
urrent Assets
Lincoln Company Jefferson Corporation
| Cash | $ 90,500 | $ 45,500 | |
| Temporary investments | 75,000 | 25,000 | |
| Accounts receivable (net) | 115,000 | 90,000 | |
| Inventories | 264,000 | 380,000 | |
| Prepaid expenses | 5,500 | 9,500 | |
| Total current assets | $550,000 | $550,000 | |
| Total current assets | $550,000 | $550,000 | |
| Less current liabilities | 210,000 | 210,000 | |
| Working capital | $340,000 | $340,000 | |
| Current ratio ($550,000/$210,000) | 2.6 | 2.6 |
Both companies show the current ratio of 2.6, but which company is more liquid and why? Does it mean that financial ratios analysis has lost its creditability?
Homework Answers
1. Pick two publicly traded companies in the same industry. 2. Calculate the ratios from your...
1. Pick two publicly
traded companies in the same industry.
2. Calculate the
ratios from your textbook or any other ratios you deem necessary
for each company for two years. Some examples are working capital,
current ratio, current cash debt coverage ratio, inventory turnover
ratio, days in inventory, receivables turnover ratio, average
collection period, debt to asset ratio, cash debt coverage ratio,
times interest earned ratio, free cash flow, earnings per share,
price earnings ratio, gross profit rate, profit margin...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Beginning of the Year $550,000 210,000 340,000 Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding End of the Year $555,000 210,000 345,000 98,600 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,500. For each of the following ratios, calculate: 1. The ratio that...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $562,000 204,000 358,000 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $8,800. For each of the following ratios, calculate: 1. The ratio that would...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $612,000 207,000 405,000 99,500 122,000 22.000 22.000 22,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,800. For each of the following ratios, calculate: 1. The...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $609,000 213,000 396,000 91,800 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $7,800. For each of the following ratios, calculate: 1. The ratio that...
Assume that you are considering purchasing stock as an investment. You have narrowed the choice to...
Assume that you are considering purchasing stock as an
investment. You have narrowed the choice to either Superiority
Corporation stock or Internet Company stock and have assembled the
following data for the two companies. Your strategy is to invest in
companies that have low price-earnings ratios but appear to be in
good shape financially. Assume that you have analyzed all other
factors and that your decision depends on the results of ratio
analysis.
1. Compute the following ratios for both...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Beginning of the Year End of the Year Total Assets $550,000 $563,000 Total Liabilities 210,000 200,000 Total Equity 340,000 363,000 Net Income for the Year 81,000 Common Shares Outstanding 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $7,600. For each of the following ratios, calculate: 1. The ratio that...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Beginning of the Year End of the Year Total Assets $550,000 $613,000 Total Liabilities 210,000 217,000 Total Equity 340,000 396,000 Net Income for the Year 84,400 Common Shares Outstanding 22,000 22,000 You discovered that they have not adjusted for estimated bad debt expenses of $7,600. For each of the following ratios, calculate: 1. The ratio that...
The accounting department of your company has just delivered a draft of the current year's financial...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $645,000 212,000 433,000 97,500 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,700. For each of the following ratios, calculate: 1. The ratio that...
How do you calculate the incorrect and correct debt ratio?
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows:$$ \begin{array}{|l|l|l|} \hline & \text { Beginning of the Year } & \text { End of the Year } \\ \hline \text { Total Assets } & \$ 550,000 & \$ 587,000 \\ \hline \text { Total Liabilities } & 210,000 & 218,000 \\ \hline \text { Total Equity } & 340,000 & 369,000 \\ \hline \text...
1. Pick two publicly
traded companies in the same industry.
2. Calculate the
ratios from your textbook or any other ratios you deem necessary
for each company for two years. Some examples are working capital,
current ratio, current cash debt coverage ratio, inventory turnover
ratio, days in inventory, receivables turnover ratio, average
collection period, debt to asset ratio, cash debt coverage ratio,
times interest earned ratio, free cash flow, earnings per share,
price earnings ratio, gross profit rate, profit margin...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Beginning of the Year $550,000 210,000 340,000 Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding End of the Year $555,000 210,000 345,000 98,600 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,500. For each of the following ratios, calculate: 1. The ratio that...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $562,000 204,000 358,000 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $8,800. For each of the following ratios, calculate: 1. The ratio that would...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $612,000 207,000 405,000 99,500 122,000 22.000 22.000 22,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,800. For each of the following ratios, calculate: 1. The...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $609,000 213,000 396,000 91,800 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $7,800. For each of the following ratios, calculate: 1. The ratio that...
Assume that you are considering purchasing stock as an
investment. You have narrowed the choice to either Superiority
Corporation stock or Internet Company stock and have assembled the
following data for the two companies. Your strategy is to invest in
companies that have low price-earnings ratios but appear to be in
good shape financially. Assume that you have analyzed all other
factors and that your decision depends on the results of ratio
analysis.
1. Compute the following ratios for both...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Beginning of the Year End of the Year Total Assets $550,000 $613,000 Total Liabilities 210,000 217,000 Total Equity 340,000 396,000 Net Income for the Year 84,400 Common Shares Outstanding 22,000 22,000 You discovered that they have not adjusted for estimated bad debt expenses of $7,600. For each of the following ratios, calculate: 1. The ratio that...
The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows: Total Assets Total Liabilities Total Equity Net Income for the Year Common Shares Outstanding Beginning of the Year $550,000 210,000 340,000 End of the Year $645,000 212,000 433,000 97,500 21,000 21,000 You discovered that they have not adjusted for estimated bad debt expenses of $9,700. For each of the following ratios, calculate: 1. The ratio that...
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