Chapter 1: Q24DQ (page 29)
Give two examples of expenses a business might incur
Expenses are the cost incurred by a business. For example, rent and depreciation.
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Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures (in \( millions) for these businesses for a recent year follow.
Check (1a) 11.3%; (1b) 9.2%
Key Figures (\) millions) Coca-Cola PepsiCo
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(46,542 \)66,504
Net income . . . . . . . . . . . . . . . . . . . . . . . 8,634 6,462
Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518
Required 1. Compute return on assets for (a) Coca-Cola and (b) PepsiCo
Coca-Cola and PepsiCo both produce and market beverages that are direct competitors. Key financial figures (in \( millions) for these businesses for a recent year follow.
Check (1a) 11.3%; (1b) 9.2%
Key Figures (\) millions) Coca-Cola PepsiCo
Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . \(46,542 \)66,504
Net income . . . . . . . . . . . . . . . . . . . . . . . 8,634 6,462
Average assets . . . . . . . . . . . . . . . . . . . . 76,448 70,518
Required 3. Write a one-paragraph memorandum explaining which company you would invest your money in and why. (Limit your explanation to the information provided.)
Define return and risk. Discuss the trade-off between them.
Identify how each of the following separate transactions 1 through 10 affects financial statements. For increases, place a “+” and the dollar amount in the column or columns. For decreases, place a “−” and the dollar amount in the column or columns. Some cells may contain both an increase (+) and a decrease (−) along with dollar amounts. The first transaction is completed as an example.
Required a. For the balance sheet, identify how each transaction affects total assets, total liabilities, and total equity. For the income statement, identify how each transaction affects net income
1 Owner invests \(800 cash in business in exchange for stock +800 +800 +800
2 Purchases \)100 of supplies on credit
3 Buys equipment for \(400 cash
4 Provides services for \)900 cash
5 Pays \(400 cash for rent incurred
6 Incurs \)200 utilities costs on credit
7 Pays \(300 cash for wages incurred
8 Pays \)50 cash for dividends
9 Provides \(600 services on credit
10 Collects \)600 cash on accounts receivable
Identify the following users as either external users (E) or internal users (I). a. Customers e. Managers i. Controllers b. Suppliers f. District attorney j. FBI and IRS c. Brokers g. Shareholders k. Consumer group d. Business press h. Lenders l. Directors
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