# I am almost complete chapter 4 and there is some questions I am

### Question Description:

I am almost complete chapter 4 and there is some questions I am having a difficult time. Brownlee_Beverly_Managerial Accounting_HW_Chapter 4.xlsx A Set – Chapter 4: Discussion Questions (Pg 183) 5. Why can a hotel or restaurant operate with a lower current ratio than other types of businesses? 8. Define the term Profitability 10. Why can asset book values be misleading when used in the Total Assets:Total Liabilities ratio? 14. Discuss the purpose of the quick ratio 17. Discuss the term financial leverage or trading on the equity. 18. List four possible operating ratios that could be used for food operations 19. List and discuss three operating ratios that could be used for rooms operations A Set -Chapter 4: Exercises (Pg 184-185) 0 E4.1 Calculate the Current Ratio and the Quick ratio for a restaurant from the following data: Cash Credit Card Receivables Accounts Receivable Quick Assets Food Inventory Prepaid Expense Current Assets $11,200 $808 $260 $12,268 $4,482 $1,220 $17,970 Current Liabilities $6,912 Quick (or Acid Test) Ratio: 1.66 Quick Ratio Formula: Beverly Brownlee Quick Assets divided by Current Liabilities Current Ratio: 2.60 Current Ratio Formula: Current Assets divided by Current Liabilities E4.2 Calculate the Working Capital from the data in E4.1 Working Capital $11,058 E4.7 A restaurant reported the following inventory and cost of sales for March which had 27 operating days. Calculate the inventory turnover and days of inventory ratios. Inventory March 1 Inventory March 31 Inventory Average Cost of Sales (March) Inventory Turnover $ $ $ $ 7,312 5,628 6,470 38,820 6.0 Operating days in March 27 Average Days of Inventory 4.5 Inventory Turnover Ratio Formula: Cost of sales divided by Inventory average Days of Inventory Formula: Days of Inventory divided by Inventory Turnover A Set – Chapter 4: Problem 4.4 (Pg 187) Reconstruct the balance sheet with only partial information Current ratio (CA/CL) is 1.25 to 1. Current Assets = 25% of Total Assets Current assets includes only cash, credit card receivables and inventory Current liabilities includes only accounts payable, payroll and current debt due Cash in bank Cash in safe Inventory $976 $1,500 $4,945 Accounts Payable $3,420 Payroll Current Portion of Bank Loan Total Bank Loan (long-term + short-term) Cash Credit Card Receivables Inventory Total Current Assets $0 $3,444 $23,000 2,476 1,159 4,945 8,580 Long Term Assets 25,740 Total Assets 34,320 Accounts Payable Payroll Current Portion of Long-Term Debt Total Current Liabilities 3,420 0 3,444 6,864 Long-Term Debt 19,556 Total Liabilities 26,420 Owners’ Equity 7,900 Total Liabilities + Equity Suggested order of analysis: 1. Determine Current Liabilities 2. Determine Long-Term Debt 3. Determine Total Liabilities 4. Determine Current Assets 5. Determine Total Assets 6. Determine Long-Term Assets 7. Determine Owner’s Equity 34,320 Beverly B y Brownlee A Set – Chapter 4: Problem 4.5 (Pg 187-188) Computation of ratios Total Assets Total Liabilities Total Stockholders’ Equity a. Assets to Liabilities b. Liabilities to Assets c. Liabilities to Stock. Equity Year Four $422,200 $312,400 $109,800 Year Five $406,400 $325,500 $81,200 1.35 0.74 2.85 1.25 0.80 4.01 Beverly Brownlee A Set – Chapter 4: Problem 4.8 (Pg 190) Analyze the incremental return of a $20,000 investment funded by all equity or a blend of equity + loans by first completing the Current income statement then making the stated adjustments to that case to create the All Equity and Equity+Loan income statements. Note: Incremental Net Income is the increase in Net Income in the two alternatives compared to the Current Case. Incremental ROE% is Incremental Net Income / Equity Invested Current Revenue Cost of Sales (30% of Revenue) Payroll Other Operating Expenses Direct Expenses + Depreciation Interest Expense Operating Income Taxes Net Income After tax Incremental Net Income Incremental ROE % $210,000 63,000 50,000 20,000 40,000