Exam 17: Financial Statement Analysis

Winnipeg Corporation has issued common shares only. The company produces and sells down-filled winter coats and has credit terms of net 30. Winnipeg has been successful and has a gross profit margin of 20%. The information shown below was taken from the company's financial statements. Instructions Calculate and comment on the following: a. Receivables turnover and the collection period. b. The inventory turnover and the days sales in inventory. c. Return on equity.

The objective to financial reporting is to provide capital providers useful information for decision making.

There are no standard ratio formulas incorporating

Horizontal analysis is also known as

Use the following information for questions . Shannon Corporation had profit of $250,000 and paid dividends to common shareholders of $50,000 in 2013. The weighted average number of shares issued in 2013 was 50,000 shares. Shannon Corporation's common shares are selling for $40 per share on the Toronto Stock Exchange. -Shannon Corporation's price-earnings ratio is

Vertical analysis is a technique which expresses each item within a financial statement

Asset turnover measures how efficiently a company uses its sales to generate assets.

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

Solvency ratios measure

The inventory turnover measures the average number of times that the inventory is sold during the period.

When a company is compared on an intracompany basis, the company will compare its ratios with other companies in the same industry.

Assume the following sales data for a company: 2015 \ 1,000,000 2014 900,000 2013 750,000 2012 500,000 If 2012 is the base year, what is the percentage increase in sales from 2012 to 2014?

If the current assets are $841,000 and the current liabilities are $541,000 then the current ratio of the company is 1.55:1.

Use the following information for questions The Home Furnishings Store had net credit sales of $7,500,000 and cost of goods sold of $4,500,000 for the year. The average inventory for the year amounted to $1,500,000. -The inventory turnover ratio for the year is

Comparisons of financial data made within a company are called

A ratio calculated in the analysis of financial statements

The following information was taken from the financial statements of Larkin Corporation: Instructions a. Calculate the net sales for each year. b. Calculate the cost of goods sold in dollars and as a percentage of net sales for each year. c. Calculate operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).

Long-term creditors are usually most interested in evaluating

Instructions a. Does horizontal analysis provide a useful tool to compare the above companies? Explain your answer using an example to demonstrate how it is useful or not useful. b. Suggest a ratio that could be used as an alternative to evaluate the profitability of the two companies and calculate the ratio. Compare the companies' profitability based on your calculations.

Short-term creditors are usually most interested in evaluating