Please review the following six ratios for Simpson Company and ABC Inc. for the year ended...

50.1K

Verified Solution

Question

Accounting

Please review the following six ratios for Simpson Company andABC Inc. for the year ended 2014, then address the two questionsbelow.
Ratio Name Simpson Company ABC Inc.
(a) Days’ Sales Outstanding 36 30
(b) Inventory Turnover 5.6 4.9
(c) Asset Turnover 2.02 3.03
(d) Earnings per Share $1.50 $1.25
(e) Times Interest Earned 6.1 5.2
(f) Return on Common Stockholders’ Equity 15.6% 12.2%
Instructions: This is a two-part question. (1) Explain themeaning of each of the Simpson Company ratios above. (18 points)(2) State which company performed better for each ratio. (18points)

Answer & Explanation Solved by verified expert

4.5 Ratings (750 Votes)

Simpson Company and ABC Inc aDays Sales Outstanding Days sales outstanding is calculated as 365 days Sales Avg Accounts Receivable The figure arrived shows how efficiently or inefficiently the companies are converting Receivables into cash It is the average number of days the company takes to convert debtors into cashThe faster the better for liquidityThe company which converts debtors into cash faster are more efficient Simpson Company takes 36 days to convert See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Ratio Name	Simpson Company	ABC Inc.
(a) Days’ Sales Outstanding	36	30
(b) Inventory Turnover	5.6	4.9
(c) Asset Turnover	2.02	3.03
(d) Earnings per Share	$1.50	$1.25
(e) Times Interest Earned	6.1	5.2
(f) Return on Common Stockholders’ Equity	15.6%	12.2%