Exam 17: Financial Statement Analysis

Selected information from the comparative financial statements of Wong Inc. for the year ended December 31, appears below: Instructions Answer the following questions relating to the year ended December 31, 2014. Show calculations. a. The inventory turnover for 2014 is __________. b. The interest coverage in 2014 is __________. c. The debt to total assets for 2014 is __________. d. The receivables turnover for 2014 is __________. e. The return on assets for 2014 is __________.

Horizontal analysis evaluates financial statements by expressing each item in a financial statement as a percentage of the base amount.

The ratios that are used to determine a company's short-term debt paying ability are

The payout ratio measures the percentage of profit distributed as cash dividends.

Return on asset is calculated as profit divided by average total assets.

Because of the importance of this ratio, publically traded companies are required to report it directly on the income statement.

An increase in the inventory turnover indicates

Vertical analysis evaluates financial statement data over different periods of time.

Company's financial information can best be analyzed by ignoring the external information which may affect the company.

Which one of the following is NOT a characteristic generally evaluated in analyzing financial statements?

Buford Corporation had a profit of $3,500,000 in 2012. Using 2012 as the base year, profit decreased by 45% in 2013 and increased by 180% in 2014. Instructions Calculate the profit reported by Buford Corporation for 2013 and 2014.

Non-financial information may include a discussion of a company's mission, goals, objectives and its market position.

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 days sales in inventory during the year was

A vertical analysis of a servicing company will have all items on the income statement expressed as a percentage of revenue.

The balance sheets of two competing companies in the same industry are provided below. The companies have approximately the same volume of sales and similar operating capacities. Instructions a. Calculate the Debt to Total Assets ratio for both companies. Which company is more solvent? b. Based on the information provided, can horizontal analysis be used to determine which company is more profitable?

Winter Clothing Store had a balance in the Accounts Receivable account of $780,000 at the beginning of the year and a balance of $820,000 at the end of the year. Net credit sales during the year amounted to $5,840,000. The collection period of the receivables was

The comparative balance sheet of Alto Communications Corporation appears below: 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. c. Comment on your analysis.

The income statements for Davis Manufacturing Inc. are provided for two recent years: Instructions a. Using the above information to prepare a vertical analysis for Davis. a., identify the reason for Davis's decreasing profit at the same time that revenue is increasing. b. Using the analysis completed in part

Below is the partial balance sheet for Abbott Limited: Instructions Using the following selected items from the comparative balance sheet of Abbott Limited, illustrate horizontal and vertical analysis. Discuss the results of each type of analysis.

A company can never have negative earnings per share.