Exam 17: Analysis of Financial Statements

Refer to the following selected financial information from Graphics, Inc. Compute the company's times interest earned. Interest expense \ 9,100 Income tax expense 22,700 Net income after tax 56,500

Financial statement analysis involves all of the following except:

Match each of the following terms with the appropriate formulas. A. Days' sales in inventory B. Dividend yield C. Total asset turnover D. Inventory turnover E. Return on common stockholders' equity F. Gross margin ratio G. Days' sales uncollected H. Profit margin ratio I. Times interest earned J. Debt ratio ________ (1) Net income - Preferred dividends Average common stockholders' equity ________ (2) Accounts receivable * 365 Net sales ________ (3) Total liabilities Total assets ________ (4) Income before interest expense and income taxes Interest expense ________ (5) Annual cash dividends per share Market price per share ________ (6) Net sales - Cost of goods sold Net sales ________ (7) Cost of goods sold Average inventory ________ (8) ______Net sales Average total assets ________ (9) Net income Net sales ________ (10) Ending inventory * 365 Cost of goods sold

Trend percentage is calculated by dividing ________ by ________ and multiplying the result by 100.

If a company is comparing this year's financial performance to last year's financial performance, it is using horizontal analysis.

A ratio expresses a mathematical relation between two quantities and can be expressed as a percent, rate, or proportion.

Evaluation of company performance can include comparison and/or assessment of all but which of the following:

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 711,000 706,000 Cost of goods sold 390,000 385,500

Net sales divided by Average accounts receivable, net is the:

Net income divided by average total assets is:

Intra-company standards for financial statement analysis:

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for operating expenses using Net sales as the base. 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

Selected current year company information follows: Net incane \ 15,953 Net sal es 712,855 Tutal liabilities, bepinging-year 83,932 Tutal liabilities, end-uf-year 103,201 Tutal stuckhalder' equity, beginging-year..... 198,935 The return on total assets is:

To compute trend percentages the analyst should:

Refer to the following selected financial information from Graceworks, Corp. Compute the company's days' sales in inventory for Year 2. (Use 365 days a year.) Year 2 Year 1 Merchandise inventory 271,000 253,500 Cost of goods sold 486,400 433,100

A company's sales in Year 1 were $280,000, and its sales in Year 2 were $341,600. Using Year 1 as the base year, what is the sales trend percent for Year 2?

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

The ability to generate positive market expectations is called:

General-purpose financial statements include the (1)________, (2) ________, (3) ________, (4) ________ and (5) ________.

Refer to the following selected financial information from McCormik, LLC. Compute the company's inventory 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 711,000 706,000 Cost of goods sold 390,000 385,500