Exam 13: Analysis of Financial Statements

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

Express the following balance sheets for Safety Company in common-size percentages. Safety Company Balance Sheets December 31,2017 and 2016 2017 2016 Assets Cash \ 43,000 \ 22,000 Accounts receivable 38,000 42,000 Merchandise inventory 61,000 52,000 Prepaid insurance 6,000 9,000 Long-term investments 49,000 20,000 Plant assets (net) 218,000 218,000 Total assets \ 415,000 \ 363,000 Liabilities and Equity Current liabilities \ 62,000 \ 75,000 Long-term liabilities 45,000 36,000 Common stock 150,000 150,000 Retained earnings 158,000 102,000 Total liabilities and equity \ 415,000 \ 363,000

Zhang Company reported Cost of goods sold of $835,000,beginning Inventory of $37,200 and ending Inventory of $46,300.The average Inventory amount is:

Cash \ 42,250 Short-term investments 60,000 Accounts receivable, net 79,500 Merchandise inventory 115,00 Prepaid expenses 9,700 Accounts payable 111,400 -Refer to the following selected financial information from Dodge Company.Compute the company's acid-test ratio.

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

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?

The measurement of key relationships between financial statement items is known as ________.

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)profit margin ratio (b)gross margin ratio (c)return on total assets (d)return on common stockholders' equity (e)book value per common share (f)basic earnings per share (g)price earnings ratio (h)dividend yield.

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once. -Debt Ratio

Gains and losses that are neither unusual nor infrequent are reported as:

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

The current year-end balance sheet data for a company are shown below.Calculate the company's: (a)working capital (b)current ratio (c)acid-test ratio. Assets: Cash \ 38,000 Marketable securities 45,000 Accounts receivable (net) 127,500 Merchandise inventory 149,500 Long-term investments 135,000 Plant assets (net) \ 17,500 Total assets \ 1,012,500 Liabilities and equity: Accounts payable \ 148,700 Accrued liabilities 90,000 Notes payable (secured by plant assets) 254,800 Common stock ( \1 2 par) 180,000 Contributed capital in excess of par 135,000 Retained earnings Total liabilities and equity \ 1,012,500

Use the following selected information from Wheeler,LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base. 2017 2016 Net sales \ 276,200 \ 231,400 Cost of goods sold 151,900 129,590 Operating expenses 55,240 53,240 Net earnings 27,820 19,820

The ability to generate future revenues and meet long-term obligations is referred to as:

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once. -Basic Earnings per Share

Standards for comparisons in financial statement analysis do not include:

Common-size statements:

Profitability is the ability to generate positive market expectations.

________ financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.