The accounting department of your company has just delivered a draft of the current year's financial statements to you. The summary is as follows:

	Beginning of the Year	End of the Year
Total Assets	$550,000	$590,000
Total Liabilities	210,000	220,000
Total Equity	340,000	370,000
Net Income for the Year		81,100
Common Shares Outstanding	21,000	21,000

You discovered that they have not adjusted for estimated bad debt expenses of $7,100. For each of the following ratios, calculate:

1. The ratio that would have resulted had the error not been discovered (i.e. the incorrect ratio).

2. The correct ratio.

ROA = INCORRECT AND CORRECT

ROE = INCORRECT AND CORRECT

DEBT RATIO = INCORRECT AND CORRECT

EPS = INCORRECT AND CORRECT

Answer rating: 100% (QA)

Compute the incorrect and correct ratios Return ... View the full answer