Tick Ltd and Tock Ltd both began operations on 1 January 2025. For illustrative purposes, assume that
Question:
Tick Ltd and Tock Ltd both began operations on 1 January 2025. For illustrative purposes, assume that at that date their statement of financial positions was identical and that their operations during 2025 were also identical. The only difference between the two companies is that they elected to use different accounting methods as can be seen below.
(a) Calculate and interpret the following ratios for each company:
i. return on assets ii. return on ordinary equity iii. profit margin iv. current ratio v. receivables turnover vi. inventory turnover vii. debt ratio.
(b) Comment on the impact that use of different accounting methods can have on the calculation of ratios.
Step by Step Answer:
Accounting
ISBN: 9780730382737
11th Edition
Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie