Exam 13: Financial Analysis: The Big Picture

Another name for horizontal analysis is trend analysis.

The following information is available for Patterson Company: 2014 2013 Accounts receivable \ 360,000 \ 340,000 Inventory 280,000 320,000 Net credit sales 3,000,000 2,600,000 Cost of goods sold 1,500,000 840,000 Net income 300,000 170,000 The inventory turnover for 2014 is

In a common size income statement, each item is expressed as a percentage of net income.

Selected data for Buechner Corporation appear below. 2014 2013 Net credit sales \ 630,000 \ 520,000 Cost of goods sold 409,500 312,000 Inventory at end of year 64,000 85,000 Accounts receivable at end of vear 90,000 50,000 Instructions Compute the following for 2014: (a) Gross profit percentage (b) Inventory turnover (c) Accounts receivable turnover

LKN Company had net credit sales of $4,290,000 and cost of goods sold of $3,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The accounts receivable turnover ratio was

The income statement for the Carolina Service Company for the year ended December 31, 2014, appears below. Sales revenue \ 670,000 Cost of goods sold 390,000 Gross profit 280,000 Expenses Net income *Includes $25,000 of interest expense and $20,000 of income tax expense. Additional information: 1. Common stock outstanding on January 1, 2014, was 50,000 shares. On July 1, 2014, 10,000 more shares were issued. 2. The market price of Carolina's stock was $22 at the end of 2014. 3. Cash dividends of $35,000 were paid, $5,000 of which were paid to preferred stockholders. Instructions Compute the following ratios for 2014: (a) Earnings per share. (b) Price-earnings. (c) Times interest earned.

All revenue and expense items are considered ordinary in nature under

If the average collection period is 52 days, what is the accounts receivable turnover?

Comparisons of company data with industry averages provide information about a company's relative position within the industry.

The comparative balance sheet of Delta Company appears below: Delta COMPANY Comparative Balance Sheet December 31, Assets Current assets \4 50 \2 80 Plant assets Total assets Current liabilities \1 80 \1 20 Long-term debt 250 160 Common stock 310 320 Retained earnings Total liabilities and stockholders' equity Instructions (a) Using horizontal analysis, show the percentage change for each balance sheet item using 2013 as a base year. (b) Using vertical analysis, prepare a common size comparative balance sheet.

Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,800,000. The average collection period of the accounts receivable in terms of days was

In performing a vertical analysis, the base for prepaid expenses is

Which situation below might indicate a company has a low quality of earnings?

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Short-term creditors are usually most interested in assessing

Ed's Drive-In $175,000 of current assets and $80,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Ed's Drive-In's current ratio?

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.

The following information pertains to Blue Flower 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 15,000 Property, plant and equipment 210,000 Total Assets \ 300,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 90,000 Stockholders' equity-common 150,000 Total Liabilities and Stockholders' Equity \ 300,000 Income Statement Sales revenue \ 121,000 Cost of goods sold 66,000 Gross margin 55,000 Operating expenses 30,000 Net income \ 25,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock .50 Cash provided by operations \ 40,000 What is the price earnings ratio for this company?

All of the following situtations below might indicate a company has a low quality of earnings except

When a change in depreciation method occurs