Exam 13: Financial Statement Analysis

Ratios that focus on cash are more useful than those that focus on income in the evaluation of the liquidity of a company.

To review the current market price of the stock,one should review the

The FASB requires a separate note in the financial statements to show the effects of inflation so that investors are able to compare statements more accurately.

The calculations for some profitability ratios are the same as the calculations for common-size analysis of the income statement.Which of the following profitability ratios would also be determined through a common-size analysis of the income statement?

Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question. ​ 2018 2017 Cash \ 22,000 \ 14,000 Accounts receivable 42,000 16,000 Merchandise inventory 22,000 83,000 Prepaid expenses 23,000 18,000 Total current assets \ 109,000 \ 131,000 Total current liabilities \ 65,000 \ 72,000 Net credit sales 221,000 326,000 Cost of goods sold 168,000 299,000 Net cash flow from operating activities 16,000 29,000 ​ -Refer to the data for Pinecrest Company. Which of the following statements is true?

Which of the following is a measure of the time that it takes to convert current assets into cash?

Presented below are selected data from the financial statements of Wave Company for 2019,2018,and 2017. ​ 2019 2018 2017 Total assets \ 1,205,000 \ 952,000 \ 945,000 Cost of goods sold 360,000 420,000 440,000 Inventory 56,000 64,000 53,000 Net income 65,000 25,000 16,000 ​ A) Calculate Wave's inventory tumover ratio for 2019 and 2018 . B) How many days would it take to sell the entire inventory at December 31,2019? At December 31,2018? Assume 360 days in a year. C) What problems do you see in the company's inventory management?

Mother Nature Supplies Following are selected data from the financial statements of Mother Nature Supplies: ​ 2018 2017 Accounts receivable \ 60,000 \ 38,000 Merchandise inventory 12,000 16,000 Total assets 450,000 380,000 Net sales 380,000 270,000 Cost of goods sold 160,000 210,000 ​ -Refer to the data for Mother Nature Supplies. Which of the following would result from a horizontal analysis of its income statement?

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 ​ (A)Calculate the return on assets ratio for St.Petersburg for 2018.What is the reason for the adjustment of interest? ​ (B)Calculate the return on common stockholders' equity ratio for 2018 for St.Petersburg.What is the reason for the adjustment of preferred dividends?

The dollar change and percentage change in the Accounts Receivable account from 2017 to 2018 is calculated for Allison Corporation.This is an example of

A solvency measure that focuses specifically on the extent to which a company relies on outsiders for funds is the

Which of the following statements is true regarding horizontal analysis?

$\text { Fawnsworth Industries }$ $\text { Below are some financial data for Fawnsworth Industries' current year. }$ Net sales on account during year \ 500,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 -Refer to the data for Fawnsworth Industries. Based on this information,what is Fawnsworth's inventory turnover ratio for the current period?

The following analysis is based on information obtained from the 2017 financial statements of Pacific Company,River Corporation,and Ocean Company. ​ (in millions) Pacific River Ocean Accounts receivable turnover ratio 10.7 18.9 12.1 Inventory turnover ratio 9.1 18.4 6.4 A) Compute the cash-to-cash operating cycle for each company for 2017 . B) What does this ratio measure? Which company has the better cash-to-cash operating cycle?

Use the Current Assets section of the balance sheets of Breeze Company as of June 30,2018 and 2017 presented below to answer the questions that follow. ​ 2018 2017 Cash and cash equival ents \ 75,000 \ 58,800 Trade accounts receivable, net 157,500 193,200 Inventory 208,200 253,400 Other current assets 18,400 15,500 Total current assets \ 459,100 \ 520,900 Total assets \ 2,650,000 \ 3,430,000 Required Complete a vertical analysis of the Current Assets section of Breeze Company's balance sheets for 2018 and 2017.Your answers should be rounded to one decimal place,

What would be at least three reasons for a decrease in inventory turnover? Explain.

Crimson Company declared and paid $1,000,000 in dividends to the common stockholders.The effect of this transaction is that the

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-to-equity ratio was 0.83 to 1 in 2018 and 0.89 to 1 in 2017.Which of the following statements is true concerning Westmoreland?

$\text { Fawnsworth Industries }$ $\text { Below are some financial data for Fawnsworth Industries' current year. }$ Net sales on account during year \ 500,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Inventory, beginning of year 90,000 Inventory, end of year 110,000 -Refer to the data for Fawnsworth Industries. Based on this information,what is the accounts receivable turnover for the current period?

Which of the following statements is true?