Exam 17: 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, begining-year 58,000 Accounts Receivable, end-of-year 72,000 Calculate the company's accounts receivable turnover and its days' sales uncollected.

Current assets minus current liabilities is:

What are the four standards for comparisons in financial analysis? Give an example of each.

Martinez Corporation reported Net sales of $765,000 and Net income of $142,000. The Profit margin is:

Use the following information from the current year financial statements of a company to calculate the ratios below: (a) Current ratio. (b) Accounts receivable turnover. (Assume the prior year's accounts receivable balance was $100,000.) (c) Days' sales uncollected. (d) Inventory turnover. (Assume the prior year's inventory was $50,200.) (e) Times interest earned ratio. (f) Return on common stockholders' equity. (Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.) (g) Earnings per share (assuming the corporation has a simple capital structure, with only common stock outstanding). (h) Price earnings ratio. (Assume the company's stock is selling for $26 per share.) (i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash dividends.) Income statement data: Sales (all on credit) $1,075,000 Cost of goods sold 575,000 Gross profit on sales $ Gross profit on sales \ 500,000 Operating expenses 305,000 Operating income \ 195,000 Interest expense 20,400 Income before taxes \ 174,600 Income taxes 74,000 Net income \ 100,600 Balance sheet data: Cash \ 38,400 Accounts receivable 120,000 Inventory 56,700 Prepaid Expen ses 24,000 Total current assets \ 239,100 Total plant assets 708,900 Total assets \ 948,000 Accounts payable \ 91,200 Interest payable 4,800 Long-tern liabilities 204,000 Total liabilities \ 300,000 Common stock, \1 0 par 480,000 Retained earnings 168,000 Total liabilities and equity \ 948,000

The debt ratio, the equity ratio, pledged assets to secured liabilities, and times interest earned are all ________ ratios.

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

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

Suppliers use financial statement information in establishing credit terms.

General standards of comparisons, developed from experience, include the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. - The current ratio is:

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Identify and describe three common tools of financial statement analysis.

________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount.

All of the following are true of a financial statement analysis report, except:

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) Total assets \ 415,000 Liabilities and Equity Current liabilities \ 62,000 \ 75,000 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

Net income divided by net sales is the:

Powers Company reported Net sales of $1,200,000 and average Accounts Receivable, net of $78,500. The accounts receivable turnover ratio is:

Ash Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what is the revenue trend percent for Years 2 and 3?

A brief focus on important analysis results and conclusions is usually included in which of the following sections of a financial statement analysis report: