Exam 13: Analysis of Financial Statements

The following current year information is available from a manufacturing company: Sales \ 740,000 Gross profit on sales 276,000 Operating income 64,000 Income before taxes 44,000 Net income 33,600 Accounts Receivable, beginning-year 58,000 Accounts Receivable, end-of-year 72,000 Calculate the company's accounts receivable turnover and its days' sales uncollected.

Describe the purpose of horizontal financial statement analysis and how it is applied.

Information from a manufacturing company's current year income statement follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned. Sales \ 850,000 Cost of goods sold 455,000 Gross profit \ 395,000 Operating expenses 260,000 Operating income \ 135,000 Interest expense 32,000 Income before taxes \ 103,000 Income taxes expense 12,400 Net income \ 90,600

________ ratios include the price-earnings ratio and dividend yield.

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750. The Days' sales in inventory (rounded to whole days) is:

Internal users of accounting information make the strategic and operating decisions of a company.

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

The return on total assets can be calculated as profit margin times total asset turnover.

Express the following income statement information in common-size percentages (round to nearest whole percent). Comment on the results. Haans Corp. Comparative Income Statements For Years Ended December 31,2018 and 2017 Sales Cost of goods sold Grossprofit Selling expenses Administrative expenses Net income 2018 \1 ,2000,000 quad396,000 132,000 2017 \ 1,000,000 650,000 \ 350,000 120,000

Ratios may be expressed as (1) ________, (2) ________, or (3) ________.

A company's calendar-year financial data are shown below. The company had total assets of $339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of $19,500 were paid during the year. Calculate the following ratios for the company: (a) debt ratio (b) equity ratio (c) debt-to-equity ratio (d) times interest earned (e) total asset turnover Net sales Cost of goods sold Grossprofit Operating expenses Operating income Interest expense Income before taxes Income taxes Net income Cash Accounts receivable (net) Inventory Plant assets (net) Total assets Current liabilities Long-term notes payable Common stock, \ 5 par value Retained earnings Total liabilities and equity \ 650,000 422,500 \ 227,500 140,500 \ 87,000 9,100 \ 77,900 23,400 \ 54,500 Ending Balances \ 19,500 65,000 71,500 74,100 97,500 65,000 114,400

Refer to the following selected financial information from McCormik, LLC. Compute the company's accounts receivable turnover for Year 2. Year 2 Year 1 Cash \ 37,500 36,850 Short-term investments 90,000 90,000 Accounts receivable, net 85,500 86,250 Merchandise inventory 121,000 117,000 Prepaid expenses 12,100 13,500 Plant assets 388,000 392,000 Accounts payable 113,400 111.750 Net sales 711,000 706,00 Cost of goods sold 390,000 385,500

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Financial reporting refers to:

Use the financial data shown below to calculate the following ratios for the current year: (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory. Income statement data Sales (all on credit)………………………………… $650,000 Cost of goods sold…………………………………. 425,000 Income before taxes……………………………….. 78,000 Net income………………………………………… 54,600 Ending Balances Beginning Balances Cash \ 19,500 \ 15,000 Accounts receivable (net) 65,000 60,000 Inventory 71,500 64,500 Plant and equipment (net) 195,000 183,900 Total assets Current liabilities \ 62,400 \ 52,700 Long-term notes payable 97,500 100,000

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

External users of accounting information manage and operate the company.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Carducci Corporation reported Net sales of $3.6 million and average Total assets of $1.1 million. The Total asset turnover is: