/*! This file is auto-generated */ .wp-block-button__link{color:#fff;background-color:#32373c;border-radius:9999px;box-shadow:none;text-decoration:none;padding:calc(.667em + 2px) calc(1.333em + 2px);font-size:1.125em}.wp-block-file__button{background:#32373c;color:#fff;text-decoration:none} 28BP_b Quantum Moving Company has the f... [FREE SOLUTION] | 91影视

91影视

Log out

Learning Materials

Features

Discover

Chapter 2: 28BP_b (page 84)

Quantum Moving Company has the following data. Industry information also is shown.

Company Data

Industry data on

Year

Net Income

Total Assets

Net income/Total assets

20X1

\(424,000

\)2,843,000

14%

20X2

428,000

3,267,000

9.8

20X3

412,000

3,834,000

3.9

Company Data

Industry data on

Year

Debts

Total Assets

Debts/Total assets

20X1

\(1,722,000

\)2,843,000

56.6%

20X2

1,732,000

3,267,000

42

20X3

1,950,000

3,834,000

38

As an industry analyst comparing the firm to the industry, are you likely to praise

or criticize the firm in terms of the following?

b) Debt/Total assets.

Short Answer

Expert verified

While the company鈥檚 debt ratio is improving, but it is not improving as rapid as the industry鈥檚 ratio. Criticism is appropriate in this case.

Step by step solution

01

Debts to total assets ratio of the company for the year ending 20X1

Debtstototalassetratio=DebtsTotalassets=$1,722,000$2,843,000=60.57%

02

Debts to total assets ratio of the company for the year ending 20X2

Debtstototalassetratio=DebtsTotalassets=$1,732,000$3,267,000=53.01%

03

Debts to Total assets ratio of the company for the year ending 20X3

Debtstototalassetratio=DebtsTotalassets=$1,950,000$3,834,000=50.86%

04

Comparison of the debts to total assets ratio between the company and the industry

Year

Company

Industry

20X1

60.57%

56.6%

20X2

53.01%

42%

20X3

50.86%

38%

The debts to total assets ratio of the company is more than the industry鈥檚 debt to assets ratio for each year. This is why the company should be criticized.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with 91影视!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Comment on why inflation may restrict the usefulness of the balance sheet as normally presented.

Billy鈥檚 Crystal Stores Inc. has assets of $5,960,000 and turns over its assets 1.9 times per year. Return on assets is 8 percent. What is the firm鈥檚 profit margin (return on sales)?

For December 31, 20X1, the balance sheet of Baxter Corporation was as follows:

Current assets

Liabilities

Cash

\(15,000

Accounts payable

\)17,000

Accounts receivable

20,000

Notes payable

25,000

Inventory

30,000

Bonds payable

55,000

Prepaid expenses

12,500

Fixed assets

Stockholder鈥檚 equity

Plant and equipment (gross)

Less: accumulated depreciation

\(255,000

51,000

Preferred stock

\)25,000

Net plant and equipment

\(204,000

Common stock

60,000

Paid in capital

30,000

Retained earnings

69,500

Total assets

\)281,500

Total liabilities and stockholder鈥檚 equity

\(281,500

Sales for 20X2 were \)245,000, and the cost of goods sold was 60 percent of sales. Selling and administrative expense was \(24,500. Depreciation expense was 8 percent of plant and equipment (gross) at the beginning of the year. Interest expense for the notes payable was 10 percent, while the interest rate on the bonds payable was 12 percent. This interest expense is based on December 31, 20X1 balances. The tax rate averaged 20 percent.

\)2,500 in preferred stock dividends were paid, and \(5,500 in dividends were paid to common stockholders. There were 10,000 shares of common stock outstanding.

During 20X2, the cash balance and prepaid expenses balances were

unchanged. Accounts receivable and inventory increased by 10 percent. A new machine was purchased on December 31, 20X2, at a cost of \)40,000. Accounts payable increased by 20 percent. Notes payable increased by \(6,500 and bonds payable decreased by \)12,500, both at the end of the year. The preferred stock, common stock, and paid-in capital in excess of par accounts did not change.

b. Prepare a statement of retained earnings for 20X2.

Given the following information, prepare an income statement for the Dental Drilling Company.

Selling and administrative expenses

$112,000

Depreciation expenses

73,000

Sales

489,000

Interest expenses

45,000

Cost of goods sold

156,000

Taxes

47,000

The Rogers Corporation has a gross profit of \(880,000 and \)360,000 in depreciation expense. The Evans Corporation also has \(880,000 in gross profit,

with \)60,000 in depreciation expense. Selling and administrative expense is $120,000 for each company. Given that the tax rate is 40 percent, compute the cash flow for both companies.

Explain the difference in cash flow between the two firms.
See all solutions

Recommended explanations on Business Studies Textbooks

Operational Management

Read Explanation

Change Management

Read Explanation

Business Case Studies

Read Explanation

Introduction to Business

Read Explanation

Project Planning & Management

Read Explanation

Human 91影视

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.