Exam 18: Financial Statement Analysis

The debt to assets ratio

The income statement for Pointe Company for the year ended December 31 2017 appears below. Sales \ 720,000 Cost of goods sold \ 380,000 Gross profit 340,000 Expenses 190,00 Net income \ 150,000 *Includes $20000 of interest expense and $25000 of income tax expense. Additional information: 1. Common stock outstanding on January 1 2017 was 50000 shares. On July 1 2017 10000 more shares were issued. 2. The market price of Pointe's stock was $11.70 at the end of 2017. 3. Cash dividends of $30000 were paid $7000 of which were paid to preferred stockholders. Instructions Compute the following ratios for 2017: (a) Earnings per share. (b) Price-earnings. (c) Times interest earned.

Which of the following is not a profitability ratio?

Other __________________ includes all changes in stockholders' equity during a period except changes resulting from investments by stockholders and distributions to stockholders.

Selected financial statement data for Freeman Company are presented below. 12/31/17 Cash \ 10,000 Short-term investments 20,000 Accounts receivable 60,000 Inventories 75,000 Total current liabilities 100,000 Instructions Compute the following ratios at December 31 2017: (a) Current. (b) Acid-test.

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments \ 45,000 Accounts receivable (net) 30,000 Inventory 40,000 Property, plant and equipment Total Assets \ 425,000 Liabilities and Stockholders' Equity Current liabilities \ 55,000 Long-term liabilities 110,000 Stockholders' equity—common 260,000 Total Liabilities and Stockholders' Equity \ 425,000 Income Statement Sales \ 120,000 Cost of goods sold 65,000 Gross profit 55,000 Operating expenses 29,500 Net income 25,500 Number of shares of common stock \ 6,000 Market price of common stock \2 0 Dividends per share .50 What is the return on assets for Ortiz?

In performing a vertical analysis the base for sales revenues on the income statement is

In performing a vertical analysis the base for sales returns and allowances is

In reporting discontinued operations the income statement should show in a special section 1) gains on the disposal of a discontinued component. 2) losses on the disposal of a discontinued component.

Common size analysis expresses each item within a financial statement in terms of a percent of a base amount.

Selected financial statement data for Mure Company are presented below. December 31, 2017 December 31, 2016 Cash \ 40,000 \ 30,000 Short-term investments 20,000 18,000 Receivables (net) 100,000 90,000 nventories 80,000 60,000 Total current liabilities 100,000 90,000 During 2017 net sales were $950000 and cost of goods sold was $770000. Instructions Compute the following ratios at December 31 2017: (a) Current. (b) Acid-test. (c) Accounts receivable turnover. (d) Inventory turnover.

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

Under which of the following cases may a percentage change be computed?

Vertical analysis is useful in making comparisons of companies of different sizes.

The following items were taken from the financial statements of Rug Inc. over a four-year period: Item 2018 2017 2016 2015 Net Sales \ 900,000 \ 650,000 \ 600,000 \ 500,000 Cost of Goods Sold 580,000 460,000 420,000 400,000 Gross Profit \ 320,000 \1 90,000 \1 80,000 \1 00,000 Instructions Using horizontal analysis and 2015 as the base year compute the trend percentages for net sales cost of goods sold and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Flite Corporation has issued common stock only. The company has been successful and has a gross profit rate of 20%. The information shown below was taken from the company's financial statements. Beginning inventory \ 482,000 Purchases 4,036,000 Ending inventory ? Average accounts receivable 800,000 Average common stockholders' equity 3,500,000 Sales (all on credit) 5,000,000 Net income 385,000 Instructions Compute the following: (a) Accounts receivable turnover and the average collection period. (b) Inventory turnover and the days in inventory. (c) Return on common stockholders' equity.

Swiss Clothing Store had a balance in the Accounts Receivable account of $920000 at the beginning of the year and a balance of $980000 at the end of the year. Net credit sales during the year amounted to $6650000. The average collection period of the receivables in terms of days was

The following financial statement information is available for Penn Corporation: 2017 2016 Stockholders' equity - common \ 350,000 \ 270,000 Net sales 784,000 697,000 Cost of goods sold 406,000 377,000 Net income 115,000 80,000 Inc tax expense 48,000 29,000 Interest expense 14,000 14,000 Dividends paid to preferred stockholders 24,000 20,000 Dividends paid to common stockholders 15,000 10,000 The return on common stockholders' equity for 2017 is

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the inventory turnover for Ortiz?

In analyzing the financial statements of a company a single item on the financial statements