Exam 18: Financial Statement Analysis

If Dolly Company had net income of $550000 in 2017 and it experienced a 25% increase in net income over 2016 what was its 2016 net income?

The acid-test ratio

Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

The comparative balance sheet of Nathan Company appears below: NATHAN COMPANY Comparative Balance Sheet December 31, Assets 2017 2016 Current assets \ 420 \ 333 Plant assets 780 567 Total assets \ 1,200 690 Liabilities and stockholders' equity Current liabilities \1 68 \1 44 Long-term debt 300 162 Common stock 432 306 Retained earnings 300 288 Total liabilities and stockholders' equity \1 ,200 \9 00 Instructions (a) Using horizontal analysis show the percentage change for each balance sheet item using 2016 as a base year. (b) Using vertical analysis prepare a common size comparative balance sheet.

Inventory turnover measures the number of times on the average the inventory was sold during the period.

Pan Inc. has an investment in available-for-sale securities of $70000. This investment experienced an unrealized loss of $6000 during the current year. Assuming a 35% tax rate the effect of this loss on comprehensive income will be

The following information pertains to Rural Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the price-earnings ratio for Rural?

The financial statements of Hainz Company appear below: Liabilities and stockholders' equity Accounts payable \ 20,000 \3 0,000 Short-term notes payable 40,000 90,000 Bonds payable 80,000 160,000 Common stock 150,000 150,000 Retained earnings 110,000 70,000 Total liabilities and stockholders' equity \4 00,000 \5 00,000 Net sales \4 00,000 Cost of goods sold 250,000 Gross profit 150,000 Expenses Operating expenses \4 2,000 Interest expense 18,000 Total expenses 60,000 Income before income taxes 90,000 Income tax expense 27,000 Net income. \6 3,000 Additional information: a. Cash dividends of $\$ 23,000$ were declared and paid in 2017 . b. Weighted-average number of shares of common stock outstanding during 2017 was 30,000 shares. c. Market value of common stock on December 31, 2017, was $\$ 21$ per share. Instructions Using the financial statements and additional information compute the following ratios for Hainz Company for 2017. Show all computations. Computations 1. Current ratio _________. 2. Return on common stockholders' equity _________. 3. Price-earnings ratio _________. 4. Acid-test ratio _________. 5. Accounts receivable turnover _________. 6. Times interest earned _________. 7. Profit margin _________. 8. Days in inventory _________. 9. Payout ratio _________. 10. Return on assets _________.

Blitzen Corporation had net income of $500000 and paid dividends to common stockholders of $40000 in 2017. The weighted average number of shares outstanding in 2017 was 60000 shares. Blitzen Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Blitzen Corporation's payout ratio for 2017 is

Nord Company had $375000 of current assets and $150000 of current liabilities before borrowing $70000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Nord Company's current ratio?

Comparative information taken from the Foren Company financial statements is shown below: A) 2017 2016 Notes receivable \ 20,000 \- 0- B) Accounts receivable 175,000 140,000 C) Retained earnings 30,000 (40,000) D) Income taxes payable 55,000 20,000 E) Sales 900,000 750,000 F) Operating expenses 160,000 200,000 Instructions Using horizontal analysis show the percentage change from 2016 to 2017 with 2016 as the base year.

Deane Company has income from continuing operations of $520000 for the year ended December 31 2017. It also has the following items (before considering income taxes): (1) A gain of $80000 on the discontinuance of a major segment. (2) A correction of an error in last year's financial statement that resulted in a $60000 overstatement of 2016 net income. Assume all items are subject to income taxes at a 25% tax rate. Instructions (a) Prepare an income statement beginning with income from continuing operations. (b) Indicate the statement presentation of any item not included in (a) above.

The ______________ ratio measures the percentage of earnings distributed in the form of cash dividends.

Nola Corporation gathered the following information for the fiscal year ended December 31 2017: Sales \ 1,300,000 Discontinued operations loss 110,000 Selling and administrative expenses 160,000 Cost of goods sold 900,000 Loss on sale of equipment 40,000 Nola Corporation is subject to a 30% income tax rate. Instructions Prepare a partial income statement beginning with income before income taxes.

Each of the following is a liquidity ratio except the

A ratio calculated in the analysis of financial statements

Times interest earned is calculated by dividing _____________ before _______________ and ________________ by interest expense.

From a creditor's point of view the higher the total debt to total assets ratio the lower the risk that the company may be unable to pay its obligations.

Using the following selected items from the comparative balance sheet of Ames Company illustrate horizontal and vertical analysis. December 31, 2015 December 31, 2014 Accounts Receivable \ 960,000 \ 600,000 Inventory 975,000 780,000 Total Assets 4,000,000 2,500,000

The current assets of Myers Company are $250000. The current liabilities are $100000. The current ratio expressed as a proportion is