Exam 13: Analyzing and Interpreting Financial Statements

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory.The acid-test (quick)ratio is:

Powers Company reported Net sales of $1,200,000 and Accounts Receivable,net of $78,500.The Day's sales uncollected (rounded to whole days)is:

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

The higher the accounts receivable turnover,the less quickly accounts receivable are collected.

Profitability is the ability to generate positive market expectations.

A corporation reported cash of $27,000 and total assets of $461,000 on its balance sheet.Its common-size percent for cash equals:

Which of the following items is typically not included as a separate item after normal revenues and expenses?

Use the following selected information from Wheeler,LLC to determine the 2018 and 2017 trend percentages for net sales using 2017 as the base. 2018 2017 Net\nobreakspacesales \ 276,200 \ 231,400 Cost\nobreakspaceof\nobreakspacegoods\nobreakspacesold 151,900 129,590 Operatirg\nobreakspaceexpenses 55,240 53,240 Net\nobreakspaceearmirgs 27,820 19,820

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is:

When an item has a value in the base period and zero in the analysis period,the decrease is 0 percent.

The following summaries from the income statements and balance sheets of Kouris Company and Brittania,Inc.are presented below. (1)For both companies for Year 2,compute the: (a)Current ratio (b)Acid-test ratio (c)Accounts receivable turnover (d)Inventory turnover (e)Days' sales in inventory (f)Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2)For both companies for Year 2,compute the: (a)Profit margin ratio (b)Return on total assets (c)Return on common stockholders' equity Which company do you consider to have better profitability ratios?

Guidelines (rules-of-thumb)are general standards of comparison developed from:

Express the following income statement information in common-size percentages (round to nearest whole percent).Comment on the results.

A corporation reports the following year-end balance sheet data.The company's working capital equals: Cash \ 40,000 Current liabilities \ 5,000 Accourts receivable 55,000 Long-temn liabilities 35,000 Irventory 60,000 Cormon stock 100,000 Equiprment Retaired earnirgs Total assets Total liabilities ard equity

Refer to the following selected financial information from Graceworks Corp.Compute the company's inventory turnover for Year 2. Year 2 Year 1 Merchardise\nobreakspaceirventory 271,000 253,500 Cost\nobreakspaceof\nobreakspacegoods\nobreakspacesold 486,400 433,100

Working capital is computed as current liabilities minus current assets.

Efficiency refers to how productive a company is in using its assets,and is usually measured relative to how much revenue is generated from a certain level of assets.

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

Refer to the following selected financial information from McCormik,LLC.Compute the company's acid-test ratio for Year 2. Year 2 Year 1 Cash \3 7,500 \ 36,850 Short-term irvestrnents 90,000 90,000 Accounts receivable, net 85,500 86,250 Merchardise irventory 121,000 117,000 Prepaid experses 12,100 13,500 Plart assets 388,000 392,000 Accounts payable 113,400 111,750 Net sales 711,000 706,000 Cost of goods sold 390,000 385,500

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.