Exam 13: Analyzing and Interpreting Financial Statements

A trend percent,or index number,is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Internal users of accounting information make the strategic and operating decisions of a company.

The following selected financial information for a company was reported for the current year end.Calculate the following company ratios: (a)Accounts receivable turnover. (b)Inventory turnover. (c)Days' sales uncollected Accounts receivable,beginning-year…………….$170,000 Accounts receivable,year-end…………………… 190,000 Merchandise inventory,beginning-year………….80,000 Merchandise inventory,year-end………………… 60,000 Cost of goods sold………………………………...580,000 Credit sales………………………………………...1,000,000

The ability to generate future revenues and meet long-term obligations is referred to as:

An advantage of common-size statements is that they reflect the dollar magnitude (size)of the different companies under analysis.

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

Dividing Accounts receivable,net by Net sales and multiplying the result by 365 is the:

Three of the most common tools of financial analysis include horizontal analysis,vertical analysis,and ratio analysis.

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is the:

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is:

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount,dividing the result by the base period amount and multiplying that result by 100.

For the following financial statement items,calculate trend percentages using Year 1 as the base year: Year 5 Year 4 Year 3 Year 2 Year 1 Sales \ 1,195,400 \ 1,118,000 \ 1,049,000 \ 963,200 \ 860,000 Cost of sales 752,400 704,000 671,000 616,700 559,000 Gross profit \ 443,000 \ 414,000 \ 378,000 \ 346,500 \ 301,000

A corporation reports the following year-end balance sheet data.The company's debt ratio 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

The common-size percent is computed by:

In order to be classified as an extraordinary gain or loss,the item must be both (1)________ and (2)________.

Use the following selected information from Wheeler,LLC to determine the 2018 and 2017 common size percentages for cost of goods sold using Net sales 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

Martinez Corporation reported Net sales of $765,000 and Net income of $142,000.The Profit margin is:

Refer to the following selected financial information from Marston Company.Compute the company's accounts receivable turnover for Year 2. Year 2 Year 1 Accounts receivable, net 86,500 82,750 Net sales 723,000 693,000

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Graphical analysis of the balance sheet can be useful in assessing sources of financing.