Exam 14: Financial Statement Analysis

Prepare an income statement using the following data for New Orleans Adventures for the year ended December 31:

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

Manx Company owns one investment, purchased several years ago for $20,000. As of the end of the year two years ago, the investment had increased in value to $26,000. As of the end of the current year, the investment had decreased somewhat in value to $24,000. Manx anticipates selling the investment in the coming year, and expects to receive $28,000. Under fair value accounting, what would be the value of the investments account on the current year's December 31 balance sheet?

Cash and accounts receivable for Adams Company are provided below: Current Year Prior Year Cash \ 70,000 \ 50,000 Accounts receivable (net) 70,400 80,000 ​ What is the amount and percentage of increase or decrease that would be shown with horizontal analysis?

Match each definition that follows with the term (a-h) it defines. -a percentage analysis of increases and decreases in related items on comparative financial statements

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Cash and short-term investments \ 30,000 Accounts receivable (net) 20,000 Inventory 15,000 Property, plant, and equipment 185,000 Total assets \ 250,000 Liabilities and Stockholders' Equity Current liabilities \ 45,000 Long-term liabilities 70,000 Common stock 80,000 Retained earnings 55,000 Total liabilities and stockhol ders' equity \ 250,000 Income Statement Sales \ 85,000 Cost of goods sold 45,000 Gross margin \ 40,000 Operating expenses (15,000) Interest expense (5,000) Net income \ 20,000 Number of shares of common stock outstanding 6,000 Market price of common stock \ 20 Total dividends paid \ 9,000 Cash provided by operations \ 30,000 ​ ​ -What is the asset turnover for Diane Company?

A company reports the following: Cost of goods sold \ 610,000 Average inventory 80,000 ​ Determine the (a) inventory turnover, and (b) number of days' sales in inventory. Round your answer to one decimal place.

Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are

The return on total assets measures the profitability of total assets, without considering how the assets are financed.

CorpCo gathered the following information as of the end of the current fiscal year: ​ Dividends on common stock \ 125,000 Market price per share of common stock \ 115.00 Shares of common stock outstanding 5,000 Dividends on preferred stock \ 65,000 Shares of preferred stock outstanding 600 Earnings per share on common stock \ 102.00 Dividends per share of common stock \ 25.00 Net income \ 575,000 ​ What is CorpCo's dividend yield? Write your answer as a percent, rounded to one decimal place.

The balance sheet for Seuss Company at the end of the current fiscal year indicated the following: ​ Bonds payable, 10\%(20 -year term) \ 5,000,000 Preferred 10\% stock, \ 100 par 1,000,000 Common stock, \ 10 par 2,000,000 ​ Income before income tax was $1,500,000 and income taxes were $200,000 for the current year. Cash dividends paid on common stock during the current year totaled $150,000. The common stock sells for $75 per share at the end of the year. ​ Determine each of the following: (a) Times interest earned (b) Earnings per share on common stock (c) Price-earnings ratio (d) Dividends per share of common stock (e) Dividend yield ​ Round to one decimal place except earnings per share and dividends per share, which should be rounded to two decimal places.

Match each ratio that follows to its use (items a-h). Items may be used more than once. -working capital

$\text { Harding Company }$ 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 quick assets?

Match each definition that follows with the term (a-h) it defines. -useful for comparing one company to another or to industry averages

In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

A company reports the following: Sales \ 1,200,000 Average accounts receivable (net) 50,000 ​ Determine the (a) accounts receivable turnover, and (b) number of days' sales in receivables. Round your answer to one decimal place.

The following items are reported on a company's balance sheet: Cash \ 230,000 Marketable securities 50,000 Accounts receivable 200,000 Inventory 240,000 Accounts payable 300,000 ​ Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal place.

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Income statement information for Sadie Company is below: Sales \ 175,000 Cost of goods sold \ 15,000 Gross profit \ 60,000 Using vertical analysis of the income statement for Sadie Company, determine the gross profit margin.