Exam 14: Financial Statement Analysis

The price-earnings ratio on common stock is calculated as

Match each ratio that follows to its use (items a-h). Items may be used more than once. -ratio of liabilities to stockholders' equity

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Rho, Sigma, and Tau Companies have the following data for the current year: ​ Rho Company Sigma Company Tau Company Frice-earnings ratio 23.7 16.9 30.1 ​ Which company would be expected to have the best potential for future common stock price appreciation?

Short-term creditors are typically most interested in analyzing a company's

$\text { Harding Company }$ Accounts payable 40,000 Accounts receivable 65,000 Accrued liabilities 7,000 Cash 30,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 110,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 30,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000 -Based on the data for Harding Company, what is the amount of working capital?

Income statement information for Lucy Company is provided below: Sales \ 175,000 Cost of goods sold 105,000 Gross profit \ 70,000 ​ Prepare a vertical analysis of the income statement for Lucy Company.

The following information has been condensed from the December 31 balance sheets of Gabriel Co.: Year 2 Year 1 Assets: Current assets \ 825,500 \ 674,300 Fixed assets (net) 1,473,600 1,275,300 Total assets \ 2,299,100 \ 1,949,600 Liabilities: Current liabilities \ 313,500 \ 309,600 Long-term liabilities 703,000 545,000 Total liabilities \ 1,016,500 \ 854,600 Stockhol ders' equity \ 1,282,600 \ 1,095,000 Total liabilities and stockholders' equity \2 ,299,100 \1 ,949,600 ​ (a) Determine the ratio of fixed assets to long-term liabilities for each year. (b) Determine the ratio of liabilities to stockholders' equity for each year. (c) Comment on the year-to-year changes for both ratios. Round your answers to two decimal places.