Exam 13: Analysis of Financial Statements

Net income divided by net sales is the:

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once. -Days' Sales in Inventory

The measurement of key relations among financial statement items is known as:

A corporation reports the following year-end balance sheet data.The company's debt ratio equals: Cash \ 40,000 Current liabilities \ 75,000 Accounts receivable 55,000 Long-term liabilities 35,000 Inventory 60,000 Common stock 100,000 Equipment 145,000 Retained earnings 90,000 Total assets \ 300,000 Total liabilities and equity \ 300,000

Selected balances from a company's financial statements are shown below.Calculate the following ratios for 2018: (a)accounts receivable turnover (b)inventory turnover (c)days' sales uncollected (d)days' sales in inventory (d)profit margin. (e)return on total assets. Dec. 31, Dec. 31, For the E018 2017 Year 2018 Accounts receivable \ 27,000 \ 24,000 Merchandise inventory 25,000 20,000 Total assets 296,000 244,000 Accounts payable 26,000 32,000 Salaries pavable 3,000 4,400 Sales (all on credit) \3 12,000 Cost of goods sold 165,600 Salaries expense 48,000 Other expenses 75,000 Net income 24,000

Identify and explain the four building blocks of financial statement analysis.

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:

Match each of the following terms with the appropriate formulas. - $\frac {\text {Annual cash dividends per share }} { \text {Market price per share } }$

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 711,000 706,000 Cost of goods sold 390,000 385,500 -Refer to the following selected financial information from McCormik,LLC.Compute the company's days' sales uncollected for Year 2.(Use 365 days a year.)

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

One of several ratios that reflects solvency includes the:

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

To compute trend percentages the analyst should:

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Financial information for Sigma Company is presented below.Calculate the following ratios for 2018: (a)Inventory turnover. (b)Accounts receivable turnover. (c)Return on total assets. (d)Times interest earned. (e)Total asset turnover. 2018 2017 Assets: Cash \ 18,00 \ 22,000 Marketable securities 25,000 0 Accounts receivable 38,000 42,000 Inventory 61,000 52,000 Prepaid insurance 6,000 9,000 Long-term investments 49,000 20,000 Plant assets, net 218,000 225,000 Total assets \ 415,000 \ 370,000 Net income after interest expense and taxes \ 62,250 Sales (all on credit) 305,000 Cost of goods sold 123,000 Interest expense 15,600 Income tax expense 27,000

Capital structure refers to a company's long-run financial viability and its ability to cover long-term obligations.

Use the following selected information from Wheeler,LLC to determine the 2017 and 2016 trend percentages for net sales using 2016 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

Industry standards for financial statement analysis:

Intra-company standards for financial statement analysis:

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________.