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In: Accounting
Financial Statement Analysis Case RAGATZ, INC. 2017 (,000) Current liabilities $ 554,114 Convertible subordinated debt $...
Financial Statement Analysis Case
RAGATZ, INC.
| 2017 (,000) | |
|---|---|
| Current liabilities | $ 554,114 |
| Convertible subordinated debt | $ 648,020 |
| Total liabilities | $ 1,228,313 |
| Stockholders' equity | $ 176,413 |
| Net income | $ 58,333 |
Analysts attempting to compare Ragatz to drug companies that issue debt with detachable warrants may face a challenge due to differences in accounting for convertible debt.
INSTRUCTIONS
- Compute the following ratios for Ragatz, Inc. (Assume that year-end balances approximate annual averages.) (1) Return on assets. (2) Return on common stock equity. (3) Debt to assets ratio.
- Briefly discuss the operating performance and financial position of Ragatz. Industry averages for these ratios in 2017 were ROA 3.5%; return on equity 16%; and debt to assets 75%. Based on this analysis, would you make an investment in the company's 5% convertible bonds? Explain.
- Assume you want to compare Ragatz to an IFRS company like Merck (which issues nonconvertible debt with detachable warrants). Assuming that the fair value of the equity component of Ragatz's convertible bonds is $150,000, how would you adjust the analysis above to make valid comparisons between Ragatz and Merck?
Solutions
ekkarill92 answered 3 years agoRelated Solutions
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Abreviated statement of financial position
. Assets 2017 2016
Non current /fixed 4 200 000 3 000 000
Inventory 4 00 000 600 000
Receivables 1 550 000 1 200 000
Cash 600 000 300 000
total 6750 000 5 100 000
Equity and Liabilities
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MONTY CORP.
Statement of Financial Position (partial)
December 31, 2020
Cash
$43,000
Accounts payable
$62,000
Accounts receivable
$95,000
Notes payable
68,000
Allowance for doubtful accounts
7,800
87,200
Inventory
186,600
Prepaid expenses
9,500
$326,300
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The following errors have been discovered in the corporation’s
accounting:
1.
January 2021 cash disbursements that were entered as at
December 2020 included payments of accounts payable...
Lansing Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities)...
Lansing Company’s 2017 income statement and selected balance
sheet data (for current assets and current liabilities) at December
31, 2016 and 2017, follow. LANSING COMPANY Income Statement For
Year Ended December 31, 2017 Sales revenue $ 124,200 Expenses Cost
of goods sold 51,000 Depreciation expense 16,500 Salaries expense
27,000 Rent expense 9,900 Insurance expense 4,700 Interest expense
4,500 Utilities expense 3,700 Net income $ 6,900 LANSING COMPANY
Selected Balance Sheet Accounts At December 31 2017 2016 Accounts
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Lansing Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities)...
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LANSING COMPANY
Income Statement
For Year Ended December 31, 2017
Sales revenue
$
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Expenses
Cost of goods sold
42,000
Depreciation expense
12,000
Salaries expense
18,000
Rent expense
9,000
Insurance expense
3,800
Interest expense
3,600
Utilities expense
2,800
Net income
$
6,000
LANSING COMPANY
Selected Balance Sheet Accounts
At December 31
2017
2016
Accounts receivable
$
5,600...
Lansing Company’s 2017 income statement and selected balance sheet data (for current assets and current liabilities)...
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2. Across:
Liabilities or debts which are scheduled to be paid within one
year. (Two Words)
3. Across: The
Situation of having a wealth position of net worth less than or
equal to zero, and the inability to pay obligations as they come
due.
4. Across: A plan
detailing both cash inflows and cash outflows.
5....
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