As part of the analytical procedures of Chu DauProducts, Inc., you perform calculations of the following ratios:

Require:

For each of the preceding ratios: 

a. State whether there is a need to investigate the results further and, if so, the reason for further investigation.

b. State the approach you would use in the investigation. 

c. Explain how the operations of Chu Dauappear to differ from those of the industry.

Transcribed Image Text:

Industry Averages Mahogany Products Ratio 2011 2010 2011 2010 1. Current ratio 2. Days to collect receivables 3. Days to sell inventory 4. Purchases divided by accounts payable 5. Inventory divided by current assets 6. Operating income divided by tangible assets 7. Operating income divided by net sales 8. Gross profit percent 9. Earnings per share 3.30 3.80 2.20 2.60 87.00 93.00 67.00 60.00 126.00 121.00 93.00 89.00 11.70 11.60 8.50 8.60 56 .51 49 48 .08 .06 .06 .14 .12 .04 21 .06 .04 21 $14.27 .27 .19 $13.91 $2.09 $1.93 Industry Averages Mahogany Products Ratio 2011 2010 2011 2010 1. Current ratio 2. Days to collect receivables 3. Days to sell inventory 4. Purchases divided by accounts payable 5. Inventory divided by current assets 6. Operating income divided by tangible assets 7. Operating income divided by net sales 8. Gross profit percent 9. Earnings per share 3.30 3.80 2.20 2.60 87.00 93.00 67.00 60.00 126.00 121.00 93.00 89.00 11.70 11.60 8.50 8.60 56 .51 49 48 .08 .06 .06 .14 .12 .04 21 .06 .04 21 $14.27 .27 .19 $13.91 $2.09 $1.93

Answer rating: 100% (QA)

Answer a Ratio number 1 Yes there is a need for investigation because the current ratio is decreased from previous year and is lower than the industry ... View the full answer