This website uses cookies to ensure you have the best experience. Learn more

Financial Accounting Essay

960 words - 4 pages

Homework 2
1. ABC earned a net profit margin of 6.7% last year and had an equity multiplier of 3.5. If its total assets are $97 million and its sales are 171 million, what is the firm's return on equity?
Enter your answer in percentages rounded off to two decimal points.
Net profit margin = Net profit / sales
Sales = 171 million
Net profit margin = 6.7%
Net profit = 171 * 6.7% = 11.46 million
Equity multiplier = Total assets/ shareholders equity
3.5 = 97 / shareholders’ equity
Equity = 97/3.5 = 27.71
Return on Equity = Net profit /Equity
= 11.46/27.72 = 41.34%

2. ABC's balance sheet indicates a book value of shareholders' equity of ...view middle of the document...

Return on Equity = Net profit / Equity
24% = 10.35/ Equity
Equity = 10.35/24% = 43.13
Debt = Total Assets – Equity
= 106 – 43.13 = 62.87
Debt Ratio = Total Debt / Total Assets
= 62.87/106
= 59.31%
5. ABC, Inc., has a market-to-book ratio of 3, net income of $84,265, a book value per share of $21.4, and 56,858 shares of stock outstanding. What is the price-earnings ratio?
Enter your answer rounded off to two decimal points.
Market- to – book ratio = Market price / Book value
3 = Market price /21.4
Market price = 3* 21.4 = 64.2 per share
EPS = net income / shares
= 84,265/56,858 = 1.48
Price – earnings ratio = market price / EPS
= 64.2/1.48 = 43.38

6. XYZ earned a net profit margin of 6.1% last year and had an equity multiplier of 2.4. If its total assets are $83 million and its sales are 168 million, what is the firm's debt ratio?
Enter your answer in percentages rounded off to two decimal points.
Net profit margin = Net profit / sales
6.1% = Net profit / 168
Net profit = 168 * 6.1% = 10.25
Equity multiplier = Total assets/ shareholders equity
2.4 = 83 / shareholders’ equity
Equity = 83/2.4 = 34.58
Debt = Total Assets – Equity
= 83 – 34.58 = 48.42
Debt Ratio = Total Debt / Total Assets
= 48.42/ 83

7. ABC's balance sheet indicates a book value of shareholders' equity of $851,637. The firm's earning per share are $3.4 and the price-earnings ratio is 12.34. If there are 54,693 shares outstanding, what is the book value per share?
Enter your answer rounded off to two decimal points.
Hint: Market value per share is same as market price per share
Book value per share = Book value of shareholder’s equity / shares

Other Essays Like Financial Accounting

Financial Accounting Boards Essay

1186 words - 5 pages Accounting Standards Boards Introduction In the financial world today companies are required to comply with numerous accounting regulations. There have been several regulatory bodies created to establish and monitor the numerous accounting regulations. These regulations not only contribute to the success of the world’s companies but they also the protect investors that contribute to the success of these companies. The Financial

Adavanced Financial Accounting Essay

2295 words - 10 pages 1956 words Abstract Fair value accounting shows a truer and fairer view of the company's real financial situation to the users of financial statements to make decision. However, the profit reflected by fair value is not true and fair value can not provide relevant information that goes with income and expense to determine the operating results. Introduction Fair value accounting is a measurement that has been used widely. The detailed

Financial Accounting 557

1704 words - 7 pages  COURSE: ACC 557 FINANCIAL ACCOUNTING ASSIGNMENT 3: YOU ARE AN INVESTMENT ANALYST! Coca Cola(CC) manufactures and sells: • beverage concentrates, sometimes referred to as ‘‘beverage bases,’’ and syrups, including fountain syrups. They refer to this part of their business as their ‘‘concentrate business’’ or ‘‘concentrate operations’’); and • finished sparkling

Fair Value Accounting Under Financial Crisis

2476 words - 10 pages June 2010, Vol.6, No.6 (Serial No.61) Journal of Modern Accounting and Auditing, ISSN 1548-6583, USA Fair value accounting under financial crisis HE Cai-xia1, ZHANG Chi2 (1. School of Accounting, Zhongnan University of Economics and Law, Wuhan 430073, China; 2. School of Management, Huazhong University of Science and Technology, Wuhan 430073, China) Abstract: The recent financial crisis has led to a vigorous debate about the pros and

Bus 557 Financial Accounting Assgn #2

898 words - 4 pages “You Are an Entrepreneur” Running Head: You Are an Entrepreneur Cathy D. Brown Professor: Kenneth Lavery Course: BUS 557 Financial Accounting

ACCT 212 Financial Accounting Complete Course

5265 words - 22 pages ACCT 212 Financial Accounting Complete Course Follow Link Below To Get Tutorial Description: ( ACCT 212 Week 1-7 Complete DQS Included ) ACCT 212 Course Project ACCT 212 Week 4 Midterm ACCT 212 Week 1 DQ1 Financial Statements ACCT 212 Week 2 DQ1 Prepaid Expenses vs. Unearned Revenue ACCT 212 Week 2 DQ2 Accrual vs. Cash Accounting ACCT

Financial Accounting

688 words - 3 pages I. Brief Exercise 7-1 Accounting for Bad Debts, p. 363 Badger recorded $500,000 of net sales for the year of which 2% is estimated to be uncollectible. Identify and analyze the adjustments at the end of the year to record bad debts. $500,000x2%= $10,000 in uncollectible debt. The accounts that will be affected include the Allowance for doubtful Accounts and the Bad Debts Expense. Both will increase by $10,000. The statements that

Financial Accounting

601 words - 3 pages 2-9A Therapy Inc. experienced the following events in 2013, its first year of operation: 1. Performed counseling services for $18,000 cash. 2. On February 1, 2013, paid $12,000 cash to rent office space for the coming year. 3. Adjusted the account to reflect the amount of rent used during the year. Required Based this information alone a. Record the events under an accounting equation. b. Prepare an income statement

Financial Accounting Chapters 1 and 2 Complete Outline

1553 words - 7 pages (1) Uses of Accounting Information and the Financial Statements a. Accounting as an Information System i. Accounting is an information system that measures, processes, and communicates financial information about an economic entity. Accountants focus on the needs of decision makers. ii. External decision makers use financial accounting reports to evaluate how well a business has achieved its goals. These reports are called financial

Introduction to Financial Accounting

523 words - 3 pages $51,500. This will also decrease the accounts payable from, $18,000 to $8,000 (Walther, 2010). . Is this company profitable? One indicator of a profitable company is the net income, as this tells the reader of the financial statement if the company made a profit for that year (Codjia, n.d.). However this is not the only document an investor wants to look at. To see the whole financial picture one must comb through the annual reports

The Fundamental Accounting Concepts And The Role Of Financial Accounting In Aiding The Decision Making Processes Of Four Different Non-Management Stakeholder Groups

2455 words - 10 pages IntroductionReliable, relevant financial statements present the best information about a company's economic history, current financial health, and prospect for the future (Johnson, 2004). The preparation and presentation of financial statements require the use of certain rules to ensure truth, fairness, and consistency.Accounting employs a number of concepts. They underlie all traditional accounting in commercial organizations and are generally

Related Papers

Financial Accounting Essay

5876 words - 24 pages Chapter 1 Financial Statements and Business Decisions ANSWERS TO QUESTIONS 1. Accounting is a system that collects and processes (analyzes, measures, and records) financial information about an organization and reports that information to decision makers. 2. Financial accounting involves preparation of the four basic financial statements and related disclosures for external decision makers. Managerial accounting involves the

Financial Accounting Essay 2137 Words

2137 words - 9 pages The Role of Financial Information in Valuation, Cash Flow Analysis, and Credit Risk Assessment Learning objectives 1. The basic steps in corporate valuation. 2. What free cash flows are and how they are used to value a company. 3. How accounting earnings are used in valuation. 4. Why current earnings are considered more useful than current cash flows for assessing future cash flows. 5. How and why the permanent, transitory, and

Financial Accounting Essay 1516 Words

1516 words - 7 pages The University of Chicago Booth School of Business | Financial Accounting 30000 | Financial Statement Analysis Case Groupon: Constructing Projected Financial Statements Designed by: Valeri Nikolaev Objective: Understanding the relation between financial statements and constructing a pro forma balance Sheet. Role of the presenting team. You are taking the role of Groupon’s management team whose task is to construct a

Intermediate Financial Accounting Essay

5060 words - 21 pages CHAPTER 1 FINANCIAL ACCOUNTING AND ACCOUNTING STANDARDS IFRS questions are available at the end of this chapter. TRUE-FALSE—Conceptual Answer No. Description F 1. Definition of financial accounting. T 2. Purpose of financial statements. T 3. Definition of financial accounting. T 4. Capital allocation process. F 5. Objective of financial reporting. T 6. Decision-Usefulness approach. T 7. Users of financial statements