26 Jun EFFECT OF MANAGEMENT DECISIONS ON RATIOS MOST DECISIONS MADE BY MANAGEMENT IMPACT THE RATIOS ANALYSTS USE TO EVALUATE PERFORMANCE.
Week One Assignment Intermediate Accounting1 Calculating ratios: solve the unknownThe current asset section of the Ecalibur Tire Company’s balance sheet consists of cash, marketable securities, accounts receivable, and inventories. The December 31, 2011 balance sheet revealed the following:Inventories 840,000Total Assets 2,800,000Current ratio 2.25Acid –test ratio 1.2Debt to equity 1.8Required:Determine the following 2011 balance sheet items:1. Current assets2. Shareholder’s equity3. Noncurrent assets4. Long-term liabilities 2 Effect of management decisions on ratios Most decisions made by management impact the ratios analysts use to evaluate performance. Indicate (by letter) whether each of the actions listed below will immediately increase (I), decrease (D), or have no effect (N) on the ratios shown. Assume each ratio is less than 1.0 before the action is taken.3 Balance Sheet ErrorsYou recently joined the internal auditing department of Marcus Clothing Corporation. As one of your firs assignments you are eamining a balance sheet prepared by a staff account.In the course of your eamination you uncover the following information pertaining to the balance sheet:1. The company rents it facilities. The land that appears in the statement is being held for future sale.2. The note receivable is due in 2013. The balance of 53,000 includes 3,000 of accrued interest. The net interest payment is due in July 2012.3. The note payable is due in installments of 20,000 per year. Interest on both the notes and bonds is payable annually.4. The company’s investments consist of marketable equity securities of other corporations. Management does not intend to liquidate any investments in the coming year.Required:Identify and eplain the deficiencies in the statement prepared by the company’s accountant. Include in your answer items that require additional disclosure, either on the face of the statement or in a note. Homework Help… on Thu, 2014-11-06 17:04 225 4.8 20.00 Solution body preview (0 words)file1.doc preview (762 words)Solutions Guide: guide. Please questions reword (especially parts) so to guarantee that an not as own.Week 1 ratios: solve the The current asset section of the Tire Company’s of cash, and The sheet the 840,000 Assets ratio Acid –test to equity 1.8Required:Determine the sheet items:1. Current 2. Shareholder’ assets liabilities ÷ Current assets assets – Inventories Quick = Current assets 840,000 Current assets ÷ Current liabilities = assets – 840,000 ÷ Current = 1.20 840,000 ÷ Current liabilities = 1.05 Current liabilities 800,000 ÷ = assets 2. Debt ratio = Total ÷ ’ 1.8Total liabilities + Total + Shareholders’ = equal + 2,800,000 3. Noncurrent = assets Current – – – more tet follows – – –
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