1. The return on assets ratio tells us the profit generated by each dollar in assets. You will want to compare this ratio to Choice Hotels' historical performance and to Marriott International to understand if it is an acceptable ratio. Is the return on assets ratio acceptable? Why or why not?

2. Which of the above ratios would you use to determine which company, Choice Hotels or Marriott International, is more attractive for an acquisition? Why?

3. Based on the financial statement analysis, earnings per share analysis, budgeting ratios, and the above profitability ratios, which company would you invest in and why?

1. Given the selling price and the quantity consumed of two products A and B in 2 different years as follows:

Product Base Year Current Year P0 Q0 P0 Qn Pn Q0 Pn Qn Price P0 Quantity Q0 Price Pn Quantity Qn

A 11 109 15 137

B 61 134 75 167

S:

(a) Calculate the summation values in above table. (fill in the table)

(b) Simple Aggregate Index = =

(c) Weighted Aggregate Index = =

(d) Laspeyres Price Index = =

(e) Laspeyres Quantity Index = =

(f) Paasche Price Index = =

(g) Paasche Quantity Index = =

Question 2

Given the selling price and quantity consumed of three products X, Y and Z in different years as follows:

2016 2017

Products Price ($) Quantity (kg) Price ($) Quantity (kg)

X 6 152 9 106

Y 14 92 16 146

Z 21 62 19 186

Use 2016 as the base year:

a. find the Simple Aggregate Price Index in 2016 and 2017;

b. find the Weighted Aggregate Price Index in 2016 and 2017;

c. find the Laspeyres Price Index in 2016 and 2017;

d. find the Paasche Quantity Index in 2016 and 2017.

Correct the answers to 2 decimal places.

Exercise 2-11

Suppose the following data were taken from the 2017 and 2016 financial statements of American Eagle Outfitters. (All numbers, including share data, are in thousands.)

(a)

Calculate the current ratio for each year. (Round answers to 2 decimal places, e.g. 15.25.)

(b)

Calculate earnings per share for each year. (Round answers to 2 decimal places, e.g. 15.25.)

(c)

Calculate the debt to assets ratio for each year. (Round answers to 1 decimal place, e.g. 29.5%.)

(d)

Calculate the free cash flow for each year. (Enter amounts in thousands. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)

Assuming Titan had 70 customers in 2015 and 80 customers in 2016,

1. calculate the operating income of Titan for 2015 and 2016;

Particulars                                                                   2015                                         2016

Revenue; 800*450;900*430                                   360,000                                 387,000

Direct Material Cost 3200*35;3300*35                112,000                                 115,500

Conversion Cost                                                      1,800,000                               1,650,000

Selling and Customer Service cost                         495,000                                   495,000

Total Cost                                                              2,407,000                                     2,260,500

Profit/Loss                                                            (2,047,000)                                 (1,873,500)

Suppose that during 2016, the overall market for AllPads grew 3%. The decrease in the selling price of the AllPad and increase in market share (that is, sales increases greater than 3%) are the result of Titan’s strategic actions.

1. Calculate how much of the change in operating income from 2015 to 2016 is due to the industry market size factor, product differentiation, and cost leadership. How does this relate to Titan’s strategy and its success in implementation? Explain.

On October 1, 2016, Ball Company issued 10% bonds dated October 1, 2016, with a face amount of $350,000. The bonds mature in 8 years. Interest is paid semiannually on March 31 and September 30. The proceeds from the bond issuance were $355,751.07 to yield 9.70%. Ball Company has a December 31 fiscal year-end and does not use reversing entries.

Required:

Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the effective interest method. Additional Instructions

PAGE 1

GENERAL JOURNAL

Prepare journal entries to record the issuance of the bonds and the interest payments for 2016 and 2017 using the straight-line method. Additional Instructions

PAGE 1

GENERAL JOURNAL

1. The following information relates to a fertiliser business for 2015:

Volume of product sold 100,000 tonnes Selling price €125 per tonne Average net profit €10 per tonne Contribution margin €30 per tonne Current plant capacity (2015) 125,000 tonnes

In 2016 the company plans to increase its profit and sales substantially, but in order to do so it will have to reduce its selling price by 4%. The variable cost per unit will not change.   

However, if the company wishes to increase production above its current plant capacity levels, it will require additional machinery which will increase the overall fixed costs by €250,000 and will bring the plant capacity to an estimated 160,000 tonnes.

Assuming the company decides to proceed with its plan to reduce its selling prices in 2016, but not install the new machinery, calculate the following:

i. The sales volume and value required to give the same profit in 2016 as was achieved in 2015; and

ii. The increase in profit that the company could achieve in 2016 by increasing sales to its existing full capacity of 125,000 tonnes.

Assuming the company decides to proceed with the installation of the new machinery,calculate the following:

iii. The break-even sales volume in 2016; and

iv. The sales volume and value required to achieve a profit in 2016 that is 25% higher than the profit achieved in 2015.

AFN equation

Broussard Skateboard's sales are expected to increase by 20% from $8.2 million in 2016 to $9.84 million in 2017. Its assets totaled $6 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 6%, and the forecasted payout ratio is 65%. What would be the additional funds needed? Do not round intermediate calculations. Round your answer to the nearest dollar.

AFN Equation

Broussard Skateboard's sales are expected to increase by 25% from $7.6 million in 2016 to $9.50 million in 2017. Its assets totaled $4 million at the end of 2016. Broussard is already at full capacity, so its assets must grow at the same rate as projected sales. At the end of 2016, current liabilities were $1.4 million, consisting of $450,000 of accounts payable, $500,000 of notes payable, and $450,000 of accruals. The after-tax profit margin is forecasted to be 3%. Assume that the company pays no dividends. Under these assumptions, what would be the additional funds needed for the coming year? Do not round intermediate calculations. Round your answer to the nearest dollar.

On January 1, 2016, Eagle borrows $22,000 cash by signing a four-year, 6% installment note. The note requires four equal total payments of accrued interest and principal on December 31 of each year from 2016 through 2019. (Table B.1, Table B.2, Table B.3, and Table B.4) (Use appropriate factor(s) from the tables provided. Round your intermediate calculations and final answers to the nearest dollar amount. Round all table values to 4 decimal places, and use the rounded table values in calculations.)

Calculate the amount of the annual payments, and then prepare the journal entries for Eagle to record the loan on January 1, 2016, and the four payments from December 31, 2016, through December 31, 2019.

Eagle borrows $22,000 cash by signing a four-year, 6% installment note. Record the issuance of the note on January 1, 2016

• Record the payment of the first installment payment of interest and principal on December 31, 2016.

• Record the payment of the second installment payment of interest and principal on December 31, 2017.
• Record the payment of the third installment payment of interest and principal on December 31, 2018.
• Record the payment of the fourth installment payment of interest and principal on December 31, 2019. (Hint: Make sure that the balance in Notes payable is $0 after this entry.)

1. Carlsbad Corporation's sales are expected to increase from $5 million in 2016 to $6 million in 2017, or by 20%. Its assets totaled $6 million at the end of 2016. Carlsbad is at full capacity, so its assets must grow in proportion to projected sales. At the end of 2016, current liabilities are $1 million, consisting of $250,000 of accounts payable, $500,000 of notes payable, and $250,000 of accrued liabilities. Its profit margin is forecasted to be 6%, and the forecasted retention ratio is 35%. Use the AFN equation to forecast Carlsbad's additional funds needed for the coming year. Write out your answer completely. For example, 5 million should be entered as 5,000,000. Round your answer to the nearest cent.

$