The Following Summaries from the Income Statements and Balance Sheets

question 51

Essay

The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below.
(1)For both companies for Year 2,compute the:
(a)Current ratio
(b)Acid-test ratio
(c)Accounts receivable turnover
(d)Inventory turnover
(e)Days' sales in inventory
(f)Days' sales uncollected
Which company do you consider to be the better short-term credit risk? Explain.
(2)For both companies for Year 2,compute the:
(a)Profit margin ratio
(b)Return on total assets
(c)Return on common stockholders' equity
Which company do you consider to have better profitability ratios?

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Definitions:

Trading To Available-For-Sale

The process of reclassifying a security from being actively traded to being held with the intention not to sell in the near term.

Comprehensive Income

The total change in equity for a reporting period other than from transactions with owners, including all non-owner changes in equity such as unrealized gains and losses.

Fair Value

The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Trading Securities

Financial instruments that are bought and sold for the purpose of generating profits on short-term fluctuations in price.