Exercise 13-11 Efficiency and profitability analysis LO P3 [The following inform
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Exercise 13-11 Efficiency and profitability analysis LO P3 [The following information applies to the questions displayed below.] Simon Company’s year-end balance sheets follow. At December 31 2014 2013 2012 Assets Cash $ 31,800 $ 35,625 $ 37,800 Accounts receivable, net 89,500 62,500 50,200 Merchandise Inventory 112,500 82,500 54,000 Prepaid expenses 10,700 9,375 5,000 Plant assets, net 278,500 255,000 230,500 Total assets $ 523,000 $ 445,000 $ 377,500 Liabilities and Equity Accounts payable $ 129,900 $ 75,250 $ 51,250 Long-term notes payable secured by mortgages on plant assets 98,500 101,500 83,500 Common stock, $10 par value 163,500 163,500 163,500 Retained earnings 131,100 104,750 79,250 Total liabilities and equity $ 523,000 $ 445,000 $ 377,500 The company’s income statements for the years ended December 31, 2014 and 2013, follow. For Year Ended December 31 2014 2013 Sales $ 673,500 $ 532,000 Cost of goods sold $ 411,225 $ 345,500 Other operating expenses 209,550 134,980 Interest expense 12,100 13,300 Income taxes 9,525 8,845 Total costs and expenses 642,400 502,625 Net Income $ 31,100 $ 29,375 Earnings per share $ 1.90 $ 1.80
Compute the current ratio for the year ended 2014, 2013, and 2012.
Compute days' sales uncollected. (Use 365 days a year.)
choose numerator / choose denominator = current ratio
? ?
2014 ? / ?
2013 ? / ?
Compute the acid-test ratio for the year ended 2014, 2013, and 2012.
Compute days' sales uncollected. (Use 365 days a year.)
choose numerator / choose denominator x days 365 days sales uncollected
? ?
2014 ? / ? x days 365
2013 ? / ? x days 365
Exercise 13-9 Part 1
(1)
Compute days' sales uncollected. (Use 365 days a year.)
choose numerator / choose denominator x days 365 days sales uncollected
? ?
2014 ? / ? x days 365
2013 ? / ? x days 365
Exercise 13-9 Part 2
Compute accounts receivable turnover.
Exercise 13-11 Part 1
Profit margin ratio.
choose numerator / choose denominator = profit margin ratio %
2014 ? / ? = ? %
2013 ? / ? = ? %
Exercise 13-11 Part 2
choose numerator / choose denominator = total asset turnover
2014 ? / ? = ? times
2013 ? / ? = ? times
Compute the current ratio for the year ended 2014, 2013, and 2012.
Compute days' sales uncollected. (Use 365 days a year.)
choose numerator / choose denominator = current ratio
? ?
2014 ? / ?
2013 ? / ?
Explanation / Answer
1)
Current ratio = current assists/current liabilities
Current assets = Cash + Accounts receivable + Merchandise inventory + prepaid expenses
Current liabilities = Equity accounts payable
2014:
= 31,800+89,500+112,500+10,700/129,900
= 1.88
2013:
=35,625+62,500+82,500+9,375/75,250
= 2.53
2012:
=37,800+50,200+54,000+5,000/51,250
= 2.87
Days’ sales uncollected = Accounts receivable/sales * 365 days in year
2014:
= 89,500/673,500*365 days
= 48.50
2013:
= 62,500/532,000*365 days
= 42.88
2)
Acid-test ratio = Quick assets/Current liabilities
Quick assets = Cash and accounts receivable
2014:
= 31,800+89,500/129,900
= 0.93
2013:
=35,625+62,500/75,250
= 1.30
2012:
=37,800+50,200/51,250
= 1.72
Days’ sales uncollected = It is already calculated above for 2014 and 2013 with available information
Accounts receivable turnover = Net sales/opening accounts receivable and closing accounts receivable
= 673,500/(62,500 + 89,500/2)
= 673,500/76,000
= 8.86
Profit margin turnover = Net income/sales*100
2014:
= 31,100/673,500*100
= 4.62%
2013:
= 29,375/532,000*100
= 5.52%
Total assets turn over = Sales/Previous year’s total assets + Current year’s total assets
2014:
= 673,500/445,000 + 523,000/2
= 673,500/484,000
= 1.39
2013:
= 532,000/377,500 + 445,000/2
= 532,000/411,250
= 1.29
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