Accounting Help

Ratio Analysis

Calculations

turnover

Dividend payout

BUS 3061 – Fundamentals of Accounting

Unit 5 – u05a1 Template

2013

2013 Answers

Current ratio

Quick ratio

Receivables turnover

Inventory

Profit margin

Asset turnover

Return on assets

Return on equity

Earnings per share

Price-earnings

Cash

Debt ratio

Debt-to-Equity

Times interest earned

Financial Statements

BUS 3061 – Fundamentals of Accounting
Unit 5 – u05a1 Template

Orange Company

December 31

2013

2013 2012

Cash

$ 18,000

$ 18,000

Inventory

Stockholder’s Equity

$ 150,000

$ 638,000 $ 560,000

	Orange Company
Income Statement	Balance Sheets
For the Years Ended	December 31
	2012
Net sales (all on account)	$ 600,000	$ 520,000	Assets
Expenses:	Current Assets
Cost of Goods Sold	$ 415,000	$ 354,000	$ 21,000			$ 18,000
Selling and administrative	$ 120,800	$ 114,600	Short-term investments	$ 15,000
Interest Expense	$ 7,800	$ 6,000	Accounts Receivable	$ 86,000	$ 74,000
Income Tax Expense	$ 14,000	$ 90,000	$ 70,000
Total expenses	$ 561,600	$ 488,600	Total Current Assets	$ 215,000	$ 177,000
Net Income	$ 38,400	$ 31,400	Plant Assets	$ 423,000	$ 383,000
Total Assets		$ 638,000		$ 560,000
Additional Data:
1. The common stock recently sold at $19.50 per share.	Liabilities and	Stockholder’s Equity
2. Cash dividends in the amount of $15,400 were paid-out in 2013.	Current Liabilities
Accounts Payable	$ 122,000	$ 110,000
Income Taxes Payable	$ 23,000	$ 20,000
Total Curent Liabilities	$ 145,000	$ 130,000
Long-term Liabilities
Bonds Payable	$ 120,000	$ 80,000
Total Liabilities	$ 265,000	$ 210,000
Common Stock ($5 par value)		$ 150,000
Retained Earnings	$ 223,000	$ 200,000
Total Stockholder’s Equity	$ 373,000	$ 350,000
Total Liabilities and Stockholder’s Equity

Title

What does the calculation of a financial statement ratio represent? How does one year compare to another? Is there a trend to the ratio data? Is the trend positive or negative? What can be done to change the trend? These are some of the questions that can be answered when the ratio data is interpreted. For this assignment, you will demonstrate your ability to interpret the results of a multi-year financial ratio analysis.

Instructions

For this assignment, use the BUS3061 Assignment u05a2 Template (listed in Resources).

On the template, you will find selected ratios for a company over a two-year period. Compare the ratios, and on a separate document (Word or Excel), submit your answers to the following questions:

1. What does the calculation of each ratio represent?

2. How does year one compare with year two, and what trend can be seen when you compare the two years?

3. Is the trend from year one to year two positive or negative?

4. What are the possible reasons for the trend?

5. What recommendations do you have for turning a negative trend to a positive trend?

BUS3061 Fundamentals of Accounting

Ratio	Year 1	Year 2
Current ratio	3.12:1	2.96:1
Quick ratio	1.34:1	1.02:1
Receivables turnover	9.7 times	10.2 times
Inventory turnover	2.4 times	2.3 times
Profit margin	11.4%	12.6%
Asset turnover	1.21 times	1.22 times
Return on assets	13.7%	15.4%
Return on equity	28.5%	29.3%
Price-earnings ratio	10.4 times	12.4 times
Debt ratio	50.2%	45.3%
Times interest earned	9.6 times	13.0 times

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Last updated: 11/5/2013 9:42 PM
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Capella Proprietary and Confidential
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Last updated: 11/5/2013 9:42 PM
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Making sense of accounting data on financial statements can be difficult. Thankfully, combining numbers from income statements, balance sheets, and other data provides a starting point to analyze a company’s financial results. You now have the opportunity to demonstrate your prowess by identifying and computing financial ratios.

Instructions

For this assignment, use the BUS3061 Assignment u05a1 Template (listed in Resources).

Analyze and compute the necessary financial ratios. The Financial Statements worksheet in the template contains the income statement, balance sheets, and additional information needed. The Ratio Analysis worksheet contains space for your calculations and answers.