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

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Accounting

Please review the following six ratios for Simpson Company andABC Inc. for the year ended 2014, then address the two questionsbelow.

Ratio NameSimpson CompanyABC Inc.
(a) Days’ Sales Outstanding3630
(b) Inventory Turnover5.64.9
(c) Asset Turnover2.023.03
(d) Earnings per Share$1.50$1.25
(e) Times Interest Earned6.15.2
(f) Return on Common Stockholders’ Equity15.6%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
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