Exam 13: Financial Statement Analysis

Solvency and liquidity differ in a company's ability

If Tommy's Subs Company has a current ratio of 2.5 and current assets of $195,000,the amount of working capital is

Lockhart Corp.'s December 31,2017,balance sheet reported current assets of $120,000 and current liabilities of $100,000.The current ratio increased by 25% one year later,on December 31,2018.Current liabilities on this date were $140,000.Determine current assets on December 31,2018.

Presented below are selected data from the financial statements of Wizard Corp. Net income \ 150,000 \ 120,000 Cash dividends paid on preferred stock \ 15,000 \ 15,000 Cash dividends paid on common stock \ 42,000 \ 38,000 Weighted average number of preferred shares outstanding 20,000 20,000 Weighted average number of common shares outstanding 105,000 95,000 Earnings per share is reported on the 2018 income statement as

An example of horizontal analysis is the increase in cost of goods sold by 29% from 2017 to 2018.

Dividends to preferred stockholders are deducted from net income when calculating the return on common stockholders' equity ratio because

Turnover ratios differ from the current and quick ratios in that they

The acid-test ratio differs from the current ratio in that it

Which of the following yields the return on assets ratio?

Westmoreland Company Following are selected data from Westmoreland Company's financial statements. ​ 2018 2017 Current liabilities \ 230,000 \ 160,000 Long-term debt 120,000 320,000 Stockhol ders' equity 420,000 540,000 Cash payments for additions to plant and equipment 45,000 32,000 Net cash flow from operating activities 80,000 51,000 Interest and principal payments 12,000 8,000 Net operating cash flows before interest and taxes 68,000 43,000 Net income 90,000 72,000 Interest expense 8,500 11,500 Income taxes 16,000 14,500 Dividends paid 15,000 30,000 ​ -Refer to the Westmoreland Company data. The company's debt service coverage ratio for 2018 indicates that the

What makes the analysis of a service company different from the analysis of a merchandising company?

The analysis of common-size statements is called horizontal analysis.

What three specific ratios are especially useful for creditors and lenders?

__________ statements recast all items on the statement as a percentage of a selected item on the statement.

The acid-test ratio is a stricter test of a company's ability to pay its current debts as they are due than the current ratio is.

The most liquid of all assets is cash.

Presented below are selected data from the financial statements of Carnival Corp.for 2018 and 2017. 2018 2017 Net income \ 110,000 \ 123,000 Cash dividends paid on common stock \ 42,000 \ 38,000 Market price per share of common stock at the end of the year \ 16.00 \ 13.00 Shares of common stock outstanding 140,000 140,000 The dividend yield ratio for 2018 is

Use the following information that was obtained from the 2018 and 2017 financial statements of Pacific Company,River Corporation,and Ocean Company to answer the questions that follow. Required Compare the three companies and answer the following: (in millions) Accounts receivable December 31,2018 \ 33,000 \ 22,000 \ 41,500 December 31,2017 30,000 12,800 42,600 Inventory December 31,2018 22,600 12,600 54,200 December 31,2017 23,900 32,800 44,000 Net sales (Credit) 2018 620,000 320,000 510,000 2017 610,000 310,000 760,000 Cost of goods sold 2018 211,000 406,000 311,000 2017 156,000 200,000 310,000 ​ $\text { A) Compute the number of days' sales in inventory for each company for } 2018 \text {. }$ ​ B) Which company appears to have the best liquidity position based solely on the inventory analysis? Explain. $\text { C) What information is provided to users with your calculations in part (A)? }$

St.Petersburg Corporation Use the information obtained from the comparative financial statements included in the St.Petersburg Corporation's 2018 annual report that is presented below to answer the questions that follow.All amounts are in thousands of dollars. ​ Dec. 31, 2018 Dec. 31, 2017 Total assets \ 800,000 \ 975,000 Total common stockholders' equity 405,000 578,000 Total stockholders' equity 504,000 702,000 December 31 FOR THE FISCAL YEARS ENDED 2018 2017 Interest expense, net of tax 5,000 700 Interest expense 6,100 5,800 Income tax expense 22,600 32,600 Net income 110,000 27,000 Common dividends 12,600 7,200 Net sales 2,667,600 1,971,000 Preferred dividends 9,000 14,400 ​ -Refer to the financial information for St.Petersburg Corporation. ​ Required Calculate the earnings per share for St.Petersburg for 2018 and 2017 assuming an average of 100,000 common shares were outstanding during 2018 and an average of 80,000 common shares were outstanding during 2017.Explain the change as it probably relates to the market value of the stock.