Corporate Financial Accounting
14th Edition
ISBN: 9781305653535
Author: Carl Warren, James M. Reeve, Jonathan Duchac
Publisher: Cengage Learning
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Textbook Question
Chapter 10, Problem 10.3ADM
Neiman Marcus and Kohl’s: Short-term liquidity analysis
Neiman Marcus Group is one of the largest luxury fashion retailers in the world. Kohl’s Corporation sells moderately priced private and national branded products through more than 1,100 department stores located throughout the United States. The current assets and current liabilities at the end of a recent year for both companies are as follows (in millions):
| Neiman Marcus | Kohl’s | |
| Current assets: | ||
| Cash | $ 197 | $1,407 |
| Inventories | 1,069 | 3,814 |
| Other current assets | 144 | 477 |
| Total current assets | $1,410 | $5,698 |
| Current liabilities: | ||
| Accounts payable | $ 375 | $1,511 |
| Other current liabilities | 482 | 1,348 |
| Total current liabilities | $ 857 | $2,859 |
A. Would an analysis of
B. Compute the quick ratio for both companies. (Round to the nearest decimal.)
C. Interpret your results.
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Short-Term Liquidity Ratios
The financial statements for Puck Enterprises, a retailer, follow.
Puck Enterprises
Consolidated Income Statements
(millions of dollars except per share data)
December 31
2023
2022
2021
Revenues
$19,233
$17,927
$16,115
Costs and expenses:
Cost of retail sales, buying, and occupancy
$14,164
$13,129
$11,751
Selling, publicity, and administration
3,175
2,978
2,801
Depreciation
498
459
410
Interest expense, net
446
437
398
Taxes other than income taxes
343
313
283
Total costs and expenses
$18,626
$17,316
$15,643
Earnings before income taxes
$607
$611
$472
Provision for income taxes
232
228
171
Net earnings
$375
$383
$301
Puck Enterprises
Consolidated Balance Sheets
(millions of dollars)
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$521
$117
Accounts receivable
1,536
1,514
Merchandise inventories
2,497
2,618…
Short-Term Liquidity Ratios
The financial statements for Puck Enterprises, a retailer, follow.
Puck Enterprises
Consolidated Income Statements
(millions of dollars except per share data)
December 31
2023
2022
2021
Revenues
$19,233
$17,927
$16,115
Costs and expenses:
Cost of retail sales, buying, and occupancy
$14,164
$13,129
$11,751
Selling, publicity, and administration
3,175
2,978
2,801
Depreciation
498
459
410
Interest expense, net
446
437
398
Taxes other than income taxes
343
313
283
Total costs and expenses
$18,626
$17,316
$15,643
Earnings before income taxes
$607
$611
$472
Provision for income taxes
232
228
171
Net earnings
$375
$383
$301
Puck Enterprises
Consolidated Balance Sheets
(millions of dollars)
December 31,
2023
2022
ASSETS
Current assets:
Cash and cash equivalents
$521
$117
Accounts receivable
1,536
1,514
Merchandise inventories
2,497
2,618…
Accounts payable $466,000Notes payable $250,000Current liabilities $716,000Long-term debt $1,166,000Common equity $4,883,000Total liabilities and equity $6,765,000
a. What percentage of the firm's assets does the firm finance using debt (liabilities)?
b. If Campbell were to purchase a new warehouse for
$1.1
million and finance it entirely with long-term debt, what would be the firm's new debt ratio?
Question content area bottom
Part 1
a. What percentage of the firm's assets does the firm finance using debt (liabilities)?
The fraction of the firm's assets that the firm finances using debt is
27.827.8%.
(Round to one decimal place.)
Part 2
b. If Campbell were to purchase a new warehouse for
$1.1
million and finance it entirely with long-term debt, what would be the firm's new debt ratio?
The new debt ratio will be
enter your response here%.
(Round to one decimal place.)
Chapter 10 Solutions
Corporate Financial Accounting
Ch. 10 - Does a discounted note payable provide credit...Ch. 10 - Employees are subject to taxes withheld from their...Ch. 10 - Prob. 3DQCh. 10 - Prob. 4DQCh. 10 - Prob. 5DQCh. 10 - To match revenues and expenses properly, should...Ch. 10 - Prob. 7DQCh. 10 - Installment notes require equal periodic payments....Ch. 10 - When should the liability associated with a...Ch. 10 - Prob. 10DQ
Ch. 10 - Proceeds from notes payable On January 26, Nyree...Ch. 10 - Prob. 10.2BECh. 10 - Journalize period payroll The payroll register of...Ch. 10 - Prob. 10.4BECh. 10 - Prob. 10.5BECh. 10 - Journalizing installment notes On the first day of...Ch. 10 - Prob. 10.7BECh. 10 - Current liabilities Bon Nebo Co. sold 25,000...Ch. 10 - Entries for notes payable Bennett Enterprises...Ch. 10 - Evaluating alternative notes A borrower has two...Ch. 10 - Entries for notes payable A business issued a...Ch. 10 - Entries for discounted note payable A business...Ch. 10 - Fixed asset purchases with note On June 30,...Ch. 10 - Prob. 10.7EXCh. 10 - Calculate payroll An employee earns 44 per hour...Ch. 10 - Prob. 10.9EXCh. 10 - Summary payroll data In the following summary of...Ch. 10 - Payroll tax entries According to a summary of the...Ch. 10 - Payroll entries The payroll register for D. Salah...Ch. 10 - Prob. 10.13EXCh. 10 - Prob. 10.14EXCh. 10 - Prob. 10.15EXCh. 10 - Accrued vacation pay A business provides its...Ch. 10 - Prob. 10.17EXCh. 10 - Prob. 10.18EXCh. 10 - Entries for installment note transactions On the...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Entries for installment note transactions On...Ch. 10 - Prob. 10.22EXCh. 10 - Prob. 10.23EXCh. 10 - Prob. 10.24EXCh. 10 - Liability transactions The following items were...Ch. 10 - Entries for payroll and payroll taxes The...Ch. 10 - Wage and tax statement data on employer FICA tax...Ch. 10 - Prob. 10.4APRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 10.1BPRCh. 10 - Prob. 10.2BPRCh. 10 - Wage and tax statement data and employer FICA tax...Ch. 10 - Prob. 10.4BPRCh. 10 - Payroll accounts and year-end entries The...Ch. 10 - Prob. 3COPCh. 10 - Prob. 10.1ADMCh. 10 - Prob. 10.2ADMCh. 10 - Neiman Marcus and Kohls: Short-term liquidity...Ch. 10 - Cabelas and Dicks Sporting Goods: Short-term...Ch. 10 - Ethics in Action Tonya Latirno is a staff...Ch. 10 - Prob. 10.3TIF
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