Exam 13: Financial Analysis: The Big Picture

When a horizontal analysis is performed and a zero or negative amount is reported in the base year, then

A company that is leveraged is one that

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 accounts receivable turnover for this company?

Dos Amugus Company has income from continuing operations of $621,000(after tax) for the year ended December 31, 2014. It also has the following items (before considering income taxes): (1) An extraordinary fire loss of $120,000. (2) A gain of $60,000 on the discontinuance of a major component. (3) A cumulative effect of a change in accounting principle that resulted in an increase in prior years' depreciation of $50,000. Assume all items are subject to income taxes at a 30% tax rate. Instructions Prepare an income statement, beginning with income from continuing operations.

The following information pertains to Unique 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 \ 40,000 Accounts receivable (net) 30,000 Inventory 20,000 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 \ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 20,000 Net income \ 25,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock 0.90 Cash provided by operations \ 30,000 What is the return on common stockholders' equity for this company?

Match the ratios with their formulas by entering the appropriate letter in the space provided. - $\frac{\text { Cash dividends declared on common stock}}{\text {Net income }}$

The following amounts were taken from the financial statements of R.Dodd Company: 2014 2013 Current liabilities \ 1,280,000 \ 1,220,000 Long-term liabilities 1,800,000 1,600,000 Interest expense 100,000 50,000 Income tax expense 50,000 30,000 Net income 400,000 170,000 Net cash provided by operating activity 425,000 270,000 The times interest earned for 2014 is

A change in accounting principle occurs when the principle used in the current year is different from the one used by competitors in the current year.

A successful discount retail store such as Kmart would probably have

Chodron Corporation had net credit sales of $13,000,000 and cost of goods sold of $9,250,000 for the year. The average inventory for the year amounted to $2,500,000. The inventory turnover for the year is

Tim Forsyth, the CEO of Magical Products, is a successful entrepreneur and his focus is his products, not his accounting system. He asks you to explain to him, in a memo, the bases of comparison for ratio analysis.

Which measure(s) is(are) useful in evaluating the efficiency in managing inventories? 1) Inventory turnover 2) Days in inventory

Junebag Corporation reported net income $36,000; net sales $400,000; and average assets $600,000 for 2014. What is the 2014 profit margin?

Dandy Candy Company sold its licorice division resulting in a loss of $60,000. Assuming a tax rate of 25%, the loss on this disposal will be reported on the income statement at what amount?

The following information pertains to Unique 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 \ 40,000 Accounts receivable (net) 30,000 Inventory 20,000 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 \ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 20,000 Net income \ 25,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock 0,90 Cash provided by onerations \ 30,000 What is the inventory turnover for this company?

Savory Thymes, Inc. had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $2,500,000. The inventory turnover for the year is

The following information pertains to Unique 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 \ 40,000 Accounts receivable (net) 30,000 Inventory 20,000 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 \ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 20,000 Net income \ 25,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock 0,90 Cash provided by onerations \ 30,000 What is the return on assets for this company?

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

A common measure of liquidity is

The following ratios have been computed for Southern Company for 2014. Profit margin ratio 20\% Times interest earned 12 times Current ratio 2.5:1 Accounts receivable turnover 5 times Debt to assets ratio 24\% The 2014 financial statements for Southern Company with missing information follows: SOUTHERN COMPANY Comparative Balance Sheet December 31 . Assets Cash \2 5,000 \3 5,000 Debt Investments 15,000 15,000 Accounts receivable (net) ?(6) 50,000 Inventory ?(7) 50,000 Property, plant, and equipment (net) Total assets quad?(8) \3 10,000 Instructions Use the above ratios and information from the Southern Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.