CHAPTER 5 INTERPRETING FINANCIAL REPORTS AND ALTERNATIVE PERSPECTIVES 125 P5.8 (Return on Capital Employed) Using the...

Transcribed Image Text:

CHAPTER 5 INTERPRETING FINANCIAL REPORTS AND ALTERNATIVE PERSPECTIVES 125 P5.8 (Return on Capital Employed) Using the above information for Acorn Services Inc., the return on capital employed a. Has improved from 40.3% to 56.4% b. Has worsened from 56.4% to 40.3% c. Has improved from 46.3% to 57.6% d. Has worsened from 57.6% to 40.3% P5.9 (Liquidity and Leveraging Ratios) In reviewing liquidity and leveraging ratios for Acorn Services Inc., we can say that a. Long-term debt has increased as a proportion of total capital employed, and liquidity has improved due to the decrease in current liabilities. b. Long-term debt has decreased as a proportion of total capital employed, and liquidity has declined due to the increase in current liabilities. c. Long-term debt has increased as a proportion of total capital employed, and liquidity has worsened due to the increase in current liabilities. d. Long-term debt has decreased as a proportion of total capital employed, and liquidity has improved due to the decrease in current liabilities. P5.10 (Calculation of Ratios) Fortune Stationers is open 250 days each year and last year achieved sales of $9 million with a gross profit of 60% of sales. At the end of the year, Fortune's statement of financial position showed Accounts receivable Inventory Accounts payable $1,200,000 450,000 1,400,000 Calculate (a) the days' sales outstanding, (b) inventory turnover, (c) days' inventory held, and (d) days' purchases outstanding. P5.11 (Calculation and Interpretation of Ratios) Rockford Inc. is a retail chain with 160 stores and 14,000 employees. Its financial statements for 2012 are shown below: Rockford Inc. Statement of Comprehensive Income (in $millions) 2012 2011 Turnover $1,021.5 $847.4 Cost of sales -855.3 -710.4 Gross profit 166.2 137.0 Administrative expenses -47.9 -29.1 Operating profit 118.3 107.9 Net interest payable -0.9 -0.3 Profit on ordinary activities before taxes 117.4 107.6 Taxes -30.7 -33.5 Profit on ordinary activities after taxes 86.7 74.1 Dividends -33.3 -29.3 Profit retained for the period $53.4 $44.8 CHAPTER 5 INTERPRETING FINANCIAL REPORTS AND ALTERNATIVE PERSPECTIVES 125 P5.8 (Return on Capital Employed) Using the above information for Acorn Services Inc., the return on capital employed a. Has improved from 40.3% to 56.4% b. Has worsened from 56.4% to 40.3% c. Has improved from 46.3% to 57.6% d. Has worsened from 57.6% to 40.3% P5.9 (Liquidity and Leveraging Ratios) In reviewing liquidity and leveraging ratios for Acorn Services Inc., we can say that a. Long-term debt has increased as a proportion of total capital employed, and liquidity has improved due to the decrease in current liabilities. b. Long-term debt has decreased as a proportion of total capital employed, and liquidity has declined due to the increase in current liabilities. c. Long-term debt has increased as a proportion of total capital employed, and liquidity has worsened due to the increase in current liabilities. d. Long-term debt has decreased as a proportion of total capital employed, and liquidity has improved due to the decrease in current liabilities. P5.10 (Calculation of Ratios) Fortune Stationers is open 250 days each year and last year achieved sales of $9 million with a gross profit of 60% of sales. At the end of the year, Fortune's statement of financial position showed Accounts receivable Inventory Accounts payable $1,200,000 450,000 1,400,000 Calculate (a) the days' sales outstanding, (b) inventory turnover, (c) days' inventory held, and (d) days' purchases outstanding. P5.11 (Calculation and Interpretation of Ratios) Rockford Inc. is a retail chain with 160 stores and 14,000 employees. Its financial statements for 2012 are shown below: Rockford Inc. Statement of Comprehensive Income (in $millions) 2012 2011 Turnover $1,021.5 $847.4 Cost of sales -855.3 -710.4 Gross profit 166.2 137.0 Administrative expenses -47.9 -29.1 Operating profit 118.3 107.9 Net interest payable -0.9 -0.3 Profit on ordinary activities before taxes 117.4 107.6 Taxes -30.7 -33.5 Profit on ordinary activities after taxes 86.7 74.1 Dividends -33.3 -29.3 Profit retained for the period $53.4 $44.8