Exam 13: Financial Statement Analysis

The cash flow from operations to capital expenditures ratio measures a company's ability to

Which of the following is the most serious limitation to financial statement analysis of publicly traded companies?

Santana Company issued additional shares of common stock.The effect of the transaction is that the

Which combination of ratios will best analyze Stetson's income statement performance?

The concept of leverage refers to the practice of using borrowed funds and amounts received from preferred stockholders in an attempt to earn an overall return that is higher than the cost of these funds.

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 balance sheet?

The return on sales ratio is a variation of the profit margin ratio.

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?

The ratio of net income to net sales is the relationship presented by the __________ ratio.

For what purpose is horizontal analysis used by management? Is this information provided to stockholders? If so,in what form? If not,why?

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. Westmoreland's debt-to-equity ratio for 2018 is

Use the Current Assets section of the balance sheets of the 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 horizontal analysis of the Current Assets section of Breeze Company's balance sheet for 2018.Your answers for "% Change" should be rounded to one decimal place, e.g. ,10.3%.Provide a short evaluation of this analysis.

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. The amount of working capital at the end of 2018 is

Ranier Parts Company has a return on assets of 12% and a return on common stockholders' equity of 15%.What causes the difference in the two returns?

Which of the following is considered a liquidity analysis tool?

Given below are three ratios calculated for Hall,Link,and Dollar Companies for 2018 and 2017. ​ (in millions) Hall Link Dollar Current ratio December 31,2018 2.8 to 1 2.3 to 1 1.8 to 1 December 31,2017 2.0 to 1 1.5 to 1 2.2 to 1 Inventory turnover ratio December 31,2018 6.9 times 5.8 times 8.0 times December 31,2017 7.6 times 5.8 times 9.6 times Acid-test ratio December 31,2018 2.5 to 1 2.1 to 1 0.5 to 1 December 31,2017 1.0 to 1 1.4 to 1 1.2 to 1 A) Which company has the greatest percentage of inventory and prepaids? How can you tell? B) Which company appears to be heading in the wrong direction concerning the ability to pay its bills in a very short-run situation? Explain. C) Which company appears to be the most liquid? Explain.

__________,or an increase in the level of prices,is another important consideration in analyzing financial statements.

Which of the following solvency ratios is the best measure to determine the degree to which a company relies on outsiders for funds?

Given below are three ratios calculated for Lantana,Tera,and Bake Companies for 2018 and 2017. ​ (in millions) Hall Link Dollar Current ratio December 31,2018 2.8 to 1 2.3 to 1 1.8 to 1 December 31,2017 2.0 to 1 1.5 to 1 2.2 to 1 Inventory turnover ratio December 31,2018 6.9 times 5.8 times 8.0 times December 31,2017 7.6 times 5.8 times 9.6 times Acid-test ratio December 31,2018 2.5 to 1 2.1 to 1 0.5 to 1 December 31,2017 1.0 to 1 1.4 to 1 1.2 to 1 A) Which company has the best inventory management? Explain. B) Which company has the best short-term financial heal th? Explain.

If the current ratio is 3 to 1 and the working capital is $100,000,then the current assets are