The financial manager is worried that the current ratio indication of short-term liquidity is so bad...
The financial manager is worried that the current ratio indication of short-term liquidity is so bad that it will be difficult to obtain additional funding. Therefore, the financial manager takes out a $100 million loan payable in a year and day and places the funds in cash. This improves the cash position significantly (since the cash is short-term and the loan is long-term) and creates an excellent current ratio. The day after the fiscal year ends, the financial manager repays the loan with the cash and returns to business as usual. Is it ethical to “massage” your numbers to present the corporation in the best possible light? Explain.
Homework Answers
Massaging the number to inflate the current ratio is unethical because it does not give a true picture of the liquidity of the company. Ratios are used by investors, creditors and other stakeholders to understand the company. Any misrepresentation would defeat the purpose of a transparent disclosure. Therefore it is not an ethical practice to manipulate the numbers in order to misrepresent the company
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The financial manager is worried that the current ratio
indication of short-term liquidity is so bad...
Which of the following would be considered liquidity or short-term solvency ratios? quick ratio; cash ratio....
Which of the following would be considered liquidity or short-term solvency ratios? quick ratio; cash ratio. quick ratio; times interest earned ratio (TIE). current ratio; long-term debt ratio. current ratio; inventory turnover ratio;
Short-Term Solvency Ratios (Liquidity Rations) 1. Calculate current ratio and quick/liquid/acid test ratio from the following:...
Short-Term Solvency Ratios (Liquidity Rations) 1. Calculate current ratio and quick/liquid/acid test ratio from the following: A Sundry debtors RO 400,000 Stock RO 160,000 A Marketable securities RO 80,000 Cash RO 120,000 * Prepaid expenses RO 40,000 Bill payables RO 80,000 Sundry creditors RO 160,000 A Debentures RO 200,000 Outstanding Expenses RO 160,000 2 Calculate current ratio and anikliidid tact rastin from the following Short-Term Solvency Ratios (Liquidity Rations) 1. Calculate current ratio and quick/liquid/acid test ratio from the following:...
36. The most common measure of short-term liquidity is the a. acid-test. b. current ratio. c....
36. The most common measure of short-term liquidity is the a. acid-test. b. current ratio. c. quick ratio. d. working capital. 37. The acid-test is calculated as Cash + Cash Equivalents + Accounts Receivable Current Liabilities Cash + Cash Equivalents + Inventory + Accounts Receivable Current Liabilities Cash + Cash Equivalents + Accounts Receivable Current Assets Cash + Cash Equivalents + Inventory + Accounts Receivable Current Assets 38. A high inventory turnover might signal a. a problem with old and...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature of its components. All of the following are reasons that this is true except: C A firm could have a high current ratio but not be able to meet demands for cash because inventory is salable only at discounted rices. C The balance sheet is prepared as of a particular date and the actual amount of liquid assets may vary considerably from the date...
Continuing Company Analysis-Amazon: Short-term liquidity analysis ADM-1 Amazon.com, Inc. is one of the largest Inte...
Continuing Company Analysis-Amazon: Short-term liquidity analysis ADM-1 Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions): Best Best Buy...
Working Capital and Current Ratio The following data (in thousands) were taken from recent financial statements...
Working Capital and Current Ratio The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.: December 31 Year 2 Year 1 Current assets $1,549,399 $1,498,763 478,810 Current liabilities 421,627 a. Compute the working capital and the current ratio as of December 31, Year 2 and Year 1. Enter working capital amounts in thousands of dollars. Round "current ratio answers to two decimal places. December 31 Year 2 Working capital Current ratio b. What conclusions concerning...
Financial ratios: Liquidity. The financial statements for Tyler Toys, Inc. are shown below: Calculate the current...
Financial ratios: Liquidity. The financial statements for
Tyler Toys, Inc. are shown below: Calculate the current ratio,
quick ratio, and cash ratio for Tyler Toys for 2013 and 2014.
Should any of these ratios or the change in a ratio warrant concern
for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,146,664
$13,566,518
Cost of goods sold
$-8,447,425
$-8,131,347
Selling, general, and
administrative expenses...
More Info X Х a. Current ratio b. Cash ratio c. Acid-test ratio d. Inventory turnover...
More Info X Х a. Current ratio b. Cash ratio c. Acid-test ratio d. Inventory turnover e. Days' sales in inventory f. Days' sales in receivables g. Gross profit percentage Print Done und intermediary calculations to two decimal places X XX and round your final answer to a. Compute the current ratio for the current year. (Abbreviations used: STI = Short-term investments. Round your answer to two decimal places, X.XX.) Current ratio b. Compute the ca: 365 days / Accounts...
Liquidity Current ratio 2014 = current assets/current liabilities 204,000/89,000 = 2.292 for 2014 and 230,000/90,000 =...
Liquidity Current ratio 2014 = current assets/current liabilities 204,000/89,000 = 2.292 for 2014 and 230,000/90,000 = 2.555 for 2015 Quick Ratio = current assets-inventory/current liabilities 204,000-66,000/89000= 1.550 for 2014 and 230,000-75000/90,000 = 1.722 for 2015 Accounts receivable turnover Credit sales/average debts Average debt 75000+82000/2 = 78500 Total sales = 3,199,900/78500 = 40.76 times (2015) Days sales outstanding = average accounts receivable/sales credit 78500/3199900 x 360 = 8.83 days (2015) Inventory turnover 66,000+75,000/2 = 70,500 Inventory turnover ratio = cost of...
P 6-24 Required Answer the following multiple-choice questions: a. A company's current ratio is 2.2 to...
P 6-24 Required Answer the following multiple-choice questions: a. A company's current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of 2.5 to 1 and a quick ratio of 0.8 to 1. Which of the following could help explain the divergence in the ratios from the beginning to the end of the year? (continued R6-Liquidity of Short...
Short-Term Solvency Ratios (Liquidity Rations) 1. Calculate current ratio and quick/liquid/acid test ratio from the following: A Sundry debtors RO 400,000 Stock RO 160,000 A Marketable securities RO 80,000 Cash RO 120,000 * Prepaid expenses RO 40,000 Bill payables RO 80,000 Sundry creditors RO 160,000 A Debentures RO 200,000 Outstanding Expenses RO 160,000 2 Calculate current ratio and anikliidid tact rastin from the following Short-Term Solvency Ratios (Liquidity Rations) 1. Calculate current ratio and quick/liquid/acid test ratio from the following:...
36. The most common measure of short-term liquidity is the a. acid-test. b. current ratio. c. quick ratio. d. working capital. 37. The acid-test is calculated as Cash + Cash Equivalents + Accounts Receivable Current Liabilities Cash + Cash Equivalents + Inventory + Accounts Receivable Current Liabilities Cash + Cash Equivalents + Accounts Receivable Current Assets Cash + Cash Equivalents + Inventory + Accounts Receivable Current Assets 38. A high inventory turnover might signal a. a problem with old and...
QUESTION 4 As a barometer of short-term liquidity the current ratio is limited by the nature of its components. All of the following are reasons that this is true except: C A firm could have a high current ratio but not be able to meet demands for cash because inventory is salable only at discounted rices. C The balance sheet is prepared as of a particular date and the actual amount of liquid assets may vary considerably from the date...
Continuing Company Analysis-Amazon: Short-term liquidity analysis ADM-1 Amazon.com, Inc. is one of the largest Internet retailers in the world. Best Buy, Inc. is a leading retailer of consumer electronics and media products in the United States. Amazon and Buy compete in similar markets; however, Best Buy sells through both traditional retail stores and the Internet, while Amazon sells only through the Internet. Current asset and current liability information from recent financial statements are as follows (in millions): Best Best Buy...
Working Capital and Current Ratio The following data (in thousands) were taken from recent financial statements of Under Armour, Inc.: December 31 Year 2 Year 1 Current assets $1,549,399 $1,498,763 478,810 Current liabilities 421,627 a. Compute the working capital and the current ratio as of December 31, Year 2 and Year 1. Enter working capital amounts in thousands of dollars. Round "current ratio answers to two decimal places. December 31 Year 2 Working capital Current ratio b. What conclusions concerning...
Financial ratios: Liquidity. The financial statements for
Tyler Toys, Inc. are shown below: Calculate the current ratio,
quick ratio, and cash ratio for Tyler Toys for 2013 and 2014.
Should any of these ratios or the change in a ratio warrant concern
for the managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,146,664
$13,566,518
Cost of goods sold
$-8,447,425
$-8,131,347
Selling, general, and
administrative expenses...
More Info X Х a. Current ratio b. Cash ratio c. Acid-test ratio d. Inventory turnover e. Days' sales in inventory f. Days' sales in receivables g. Gross profit percentage Print Done und intermediary calculations to two decimal places X XX and round your final answer to a. Compute the current ratio for the current year. (Abbreviations used: STI = Short-term investments. Round your answer to two decimal places, X.XX.) Current ratio b. Compute the ca: 365 days / Accounts...
P 6-24 Required Answer the following multiple-choice questions: a. A company's current ratio is 2.2 to 1 and quick (acid-test) ratio is 1.0 to 1 at the beginning of the year. At the end of the year, the company has a current ratio of 2.5 to 1 and a quick ratio of 0.8 to 1. Which of the following could help explain the divergence in the ratios from the beginning to the end of the year? (continued R6-Liquidity of Short...
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