Question

B27 x for Analyze 4 additional analytical procedures that were completed in the planning Days Outstanding in Accounts Receiva
Available on Monday, November 4, 2019 12:00 AM EST until Sunday, November 10, 2019 11:59 PM EST & Unlocked: Monday, November
0 0
Add a comment Improve this question Transcribed image text
Answer #1

1. EarthWear's quick ratio is 0.73 and the industry average is 0.80:

This ratio indicates that Earthwear's short term liquidity position is not as good as the industry, and the most liquid assets of Earthwear are not as able to meet the short term payment obligations as the industry. This means that Earthwear should try to convert more of its current assets to quick assets in order to bring the ratio at par with the industry.

2. EarthWear's inventory turnover is 3.88, and the industry average is 6.20:

EarthWear is not being able to turn its investment in inventory into sales as fast as its peers in industry. EarthWear is obviously purchasing more inventory than it requires in the short term, and this does not indicate very well about the inventory management practices followed by EarthWear. Not only is the cost of investment in inventory higher, EarthWear is also running the risk of carrying obsolete inventory in its stock, and higher warehousing cost. It is possible that EarthWear would need to recognize loss in inventory value in the near future unless it can improve its inventory turnover.

3. EarthWear's Gross Profit Percentage is 43.90 %, and the industry average is 38.80 % :

Gross profit is the difference between revenues and cost of sales. This ratio indicates that EarthWear earns 43.90 % in gross profit per dollar of revenue, while the competitors are earning only 38.8 % per dollar. This can indicate that either EarthWear has better pricing power, or that it manages its cost of sales better as compared to the industry.

4. EarthWear's Debt to Equity ratio is 0.50, and the industry average is 0.84:

EarthWear has lower financial leverage on its books, which means that a third of the assets of EarthWear is financed by outside liabilities, while 46 % of the assets are financed by outside liabilities for the other players in the industry. This indicates that EarthWear prefers lower financial risk on its books, having lower finance cost, and enjoying greater financial flexibility for expansion or diversification.

Add a comment
Know the answer?
Add Answer to:
B27 x for Analyze 4 additional analytical procedures that were completed in the planning Days Outstanding...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
  • Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee

    1. Which of the following matters would an auditor most likely consider to be a significant deficiency to be communicated to the audit committee? A. Management's failure to renegotiate unfavorable long-term purchase commitments.B. Recurring operating losses that may indicate going concern problems.C. Evidence of a lack of objectivity by those responsible for accounting decisions.D. Management's current plans to reduce its ownership equity in the entity. 2. After obtaining an understanding of internal control and arriving at a preliminary assessed level...

  • Refer to Harrisons’ Income Statement data which is located in Appendix B to the Partner’s Memo...

    Refer to Harrisons’ Income Statement data which is located in Appendix B to the Partner’s Memo and record your answers to the following questions: Perform analytical procedures for the completeness assertion of advertising expense, security expense and bad debts expense and indicate whether you believe that there is a concern about material misstatements in each accoun Suggest an appropriate substantive procedure to test the completeness of security expense. Monet & Associates Memo To: Dean Smith (Audit Senior) From: Vince Mater...

  • LO 10-6, 10 10-36 Based on an assessment of audit risk, the auditors are concerned with...

    LO 10-6, 10 10-36 Based on an assessment of audit risk, the auditors are concerned with the following two risks: 1. The risk that that the client might be making duplicate payments to vendors. 2. The risk that the client's accounting clerk might be making unauthorized payments to himself. a. Assuming that the client has a manual accounting system, describe how the auditors can design a test to identify the duplicate payments and unauthorized payments. b. Assuming that the client...

  • First, read the article on "The Delphi Method for Graduate Research." ------ Article is posted below...

    First, read the article on "The Delphi Method for Graduate Research." ------ Article is posted below Include each of the following in your answer (if applicable – explain in a paragraph) Research problem: what do you want to solve using Delphi? Sample: who will participate and why? (answer in 5 -10 sentences) Round one questionnaire: include 5 hypothetical questions you would like to ask Discuss: what are possible outcomes of the findings from your study? Hint: this is the conclusion....

  • I have this case study to solve. i want to ask which type of case study...

    I have this case study to solve. i want to ask which type of case study in this like problem, evaluation or decision? if its decision then what are the criterias and all? Stardust Petroleum Sendirian Berhad: how to inculcate the pro-active safety culture? Farzana Quoquab, Nomahaza Mahadi, Taram Satiraksa Wan Abdullah and Jihad Mohammad Coming together is a beginning; keeping together is progress; working together is success. - Henry Ford The beginning Stardust was established in 2013 as a...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT