Professional Documents
Culture Documents
LEARNING OBJECTIVES:
When your students have finished studying this chapter, they should be
able to:
5. Identify the major implications that efficient stock markets have for
accounting.
INTERNET EXERCISE
48. General Electric’s Annual Report
A. The Acquisition
A. Noncontrolling Interests
Short-Term Ratios:
Debt-to-Equity Ratios:
Profitability Ratios:
Dividend Ratios:
Many ratios are used simultaneously rather than one at a time for
such predictions. Research showed that accounting reports are
only one source of information. In the aggregate, companies that
choose the least-conservative accounting policies do not fool the
market. In sum, the market as a whole generally sees through any
attempts by companies to gain favor through the choice of
accounting policies that tend to boost immediate income.
Learning Objective 2
Learning Objective 3
Learning Objective 4
20X1 20X2
Assets
Cash $ 61,100 $ 27,200
Accounts Receivable (net) 72,500 142,700
Inventory 122,600 107,800
Property, Plant, and Equipment (net) 577,700 507,500
Total Assets $833,900 $785,200
20X2 20X1
7. The Boston Rob Company's current ratio for 20X2 was _____.
9. Boston Rob Company's gross profit rate for 20X1 was _____.
Learning Objective 5
12. If markets are truly efficient, then the proper portfolio includes
which of the following characteristics?
a. risk control
b. high diversification
c. low turnover of securities
d. all of the above
e. none of the above
6. [d]
8. [c] In 20X1 the total debt-to-equity ratio was .73, which was
computed as [($72,300 + $50,000 + $210,000) / ($300,000 +
$152,900)]. In 20X2, the total debt-to-equity ratio has
increased to .74 [($104,700 + $50,000 + $200,000) /
($300,000 + $179,200)].
9. [c] The gross profit rate is found by dividing the gross profit
by sales. For 20X1, that would be $503,800/$900,000 =
55.98%.
10. [c] The return on sales is found by dividing the net income