ACC 212 WEEK 1 MODULE 1 ASSIGNMENT 2 E14-18 Question Help Big BeautifulPicture Frames has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2009. To answer this question, you gather the following data: LOADING… (Click the icon to view the data.) Requirement 1. Compute the following ratios for 2009 and 2008: â€ƒâ€ƒâ€ƒâ€ƒa. Current ratio â€ƒâ€ƒâ€ƒâ€ƒb. Acid-test ratio â€ƒâ€ƒâ€ƒâ€ƒc. Debt ratio â€ƒâ€ƒâ€ƒâ€ƒd. Times-interest-earned ratio 2009 2008 Cash $46,000 $45,000 Short-term investments 27,000 Ã¢â‚¬â€ Net receivables 122,000 124,000 Inventory 227,000 252,000 Total assets 510,000 490,000 Total current liabilities 255,000 212,000 Long-term note payable 44,000 56,000 Income from operations 160,000 163,000 Interest expense 46,000 31,000 E14-19 (similar to) Question Help The McCormick, Inc., comparative income statement follows. 2010 data are given as needed. Requirements 1. Calculate the rate of return on net sales. 2. Calculate the rate of return on total assets. 3. Calculate the rate of return on common stockholders’ equity. 4. Calculate the EPS. 5. Did the company’s operating performance improve or deteriorate during 2012? McCormick, Inc. Comparative Income Statement Years Ended December 31, 2012 and 2011 (Dollars in thousands) 2012 2011 2010 Net sales $177,000 $159,000 Cost of goods sold 93,100 86,400 Selling and general expenses 46,900 41,300 Interest expense 9,500 10,800 Income tax expense 10,300 9,700 Net income $17,200 $10,800 Additional data: Total assets $202,000 $192,000 $172,000 Common stockholders’ equity $96,300 $89,400 $79,400 Preferred dividends $3,200 $3,200 $0 Common shares outstanding during the year 20,000 20,000 17,500 P14-23a (similar to) Question Help The Russell Department Stores, Inc., chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the average for the industry. The CEO has given you the company’s income statement and balance sheet, as well as the industry average data for retailers. Requirements 1. Prepare a common-size income statement and balance sheet for RussellRussell. The first column of each statement should present RussellRussell’s common-size statement, and the second column, the industry averages. 2. For the profitability analysis, compute RussellRussell’s (a) ratio of gross profit to net sales, (b) ratio of operating income to net sales, and (c) ratio of net income to net sales. Compare these figures with the industry averages. Is RussellRussell’s profit performance better or worse than the industry average? 3. For the analysis of financial position, compute RussellRussell’s (a) ratio of current assets to total assets and (b) ratio of stockholders’ equity to total assets. Compare these ratios with the industry averages. Is RussellRussell’s financial position better or worse than the industry averages? Russell Department Stores, Inc. Income Statement Compared with Industry Average Year Ended December 31, 2010 Industry Russell Average Net sales $778,000 100.00% Cost of goods sold 526,706 65.8 Gross profit 251,294 34.2 Operating expenses 160,268 19.7 Operating income 91,026 14.5 Other expenses 7,780 0.4 Net income $83,246 14.10% Russell Department Stores, Inc. Balance Sheet Compared with Industry Average 31-Dec-10 Industry Russell Average Current assets $312,340 70.90% Fixed assets, net 115,920 23.6 Intangible assets, net 8,280 0.8 Other assets 23,460 4.7 Total assets $460,000 100.00% Current liabilities $214,360 48.10% Long-term liabilities 105,800 16.6 Stockholders’ equity 139,840 35.3 Total liabilities and stockholders’ equity $460,000 100.00%
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