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Chapter 15: Q3SE (page 835)

Muscateer Corp. reported the following revenues and net income amounts:

(In millions)2019 2018 2017 2016

Revenue \( 9,610 \) 9,355 \( 9,050 \) 8,950

Net Income 7,290 6,790 5,020 4,300

Requirements

1. Calculate Muscateer’s trend analysis for revenues and net income. Use 2016 as the

base year, and round to the nearest percent.

2. Which measure increased at a higher rate during 2017–2019?

Short Answer

Expert verified

Answer

Income Increases in 2019 as compared to past years

Step by step solution

01

Calculation


2019

2018

2017

2016

Revenue $

9,610

9,355

9,050

8,950


107%

105%

101%

100%






Net Income$

$7,290

6,790

5,020

4,300


170%

158%

117%

100%

02

Workings


2019

2018

2017

2016

Revenue $

9,610

9,355

9,050

8,950


9610/8950

9355/8950

9050/8950

8950/8950






Net Income$

$7,290

6,790

5,020

4,300


7290/4300

6790/4300

5020/4300

4300/4300

Net Income increased rapidly from 2016- 2019

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Most popular questions from this chapter

Data for Research Enterprises follows:

2019

2018

2017

Total current assets

\(490,000

\)320,000

\(230,000

Total current liabilities

\)235,000

\(160,000

\)115,000

Compute the dollar amount of change and the percentage of change in Research Enterprises’ working capital each year during 2019 and 2018. What do the calculated changes indicate?

Briefly describe the ratios that can be used to evaluate a company’s ability to paycurrent liabilities.

Big Beautiful Photo Shop has asked you to determine whether the company’s ability to pay current liabilities and total liabilities improved or deteriorated during 2018. To answer this question, you gather the following data:

2018

2017

Cash

\(58,000

\)47,000

Short-term Investments

34,000

0

Net Accounts Receivable

140,000

124,000

Merchandise Inventory

217,000

272,000

Total Assets

530,000

565,000

Total Current Liabilities

288,000

205,000

Long-term Notes Payable

40,000

50,000

Income from Operations

165,000

158,000

Interest Expense

55,000

41,000

Compute the following ratios for 2018 and 2017, and evaluate the company’s ability to pay its current liabilities and total liabilities:

a. Current ratio

b. Cash ratio

c. Acid-test ratio

d. Debt ratio

e. Debt to equity ratio

Data for Connor, Inc. and Alto Corp. follow:

Connor Alto

Net Sales Revenue \( 13,000 \) 22,000

Cost of Goods Sold 7,917 15,730

Other Expenses 4,342 5,170

Net Income \( 741 \) 1,100

Requirements

1. Prepare common-size income statements.

2. Which company earns more net income?

3. Which company’s net income is a higher percentage of its net sales revenue?

The financial statements of Ion Corporation include the following items:

Current Year Preceding Year

Balance Sheet:

Cash \( 6,000 \) 8,000

Short-term Investments 4,400 10,700

Net Accounts Receivable 21,600 29,200

Merchandise Inventory 30,800 27,600

Prepaid Expenses 6,000 3,600

Total Current Assets 68,800 79,100

Total Current Liabilities 53,200 37,200

Income Statement:

Net Sales Revenue $ 184,800

Cost of Goods Sold 126,000

Compute the following ratios for the current year:

7. Current ratio

8. Acid-test ratio

9. Inventory turnover

10. Gross profit percentage
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