Exam 13: Financial Statement 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 number of days' sales in receivables (assuming a 360-day year)?

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 cash flow from operations to capital expenditures ratio for 2018 is an indicator that Westmoreland Company

What is meant by the concept of "activity" as it relates to turnover ratios? Explain.

The number of days' sales in inventory is the same as a company's accounting cycle.

The operating cycle of a manufacturer is the length of time between the

In considering equity and debt financing,which of the following statements is true?

Presented below are selected data from the financial statements of Hospital Supply Company for 2019,2018,and 2017. ​ ​ 2018 2017 2013 Total assets \ 650,000 \ 821,000 \ 800,000 Net credit sales 800,000 650,000 720,000 Accounts receivable 85,000 79,000 74,000 Accounts receivable turnover ratio 9.8 times 8.5 times 8.0 times ​ A) Calcul ate Hospital Supply's number of days' sales in receivables for 2019 and 2018. Assume 360 days in a year. B) What is the meaning of your answer in part (A)?

Horizontal analysis is analysis

The __________ ratio indicates the company's ability to meet the current year's interest payments out of the current year's earnings.

Assume that the current ratio is 2:1 for the company in question.Show the effect of each of the transactions below on total assets and the current ratio by using one of the following symbols in each box to complete the table.If the numerator and denominator of a ratio both increase or both decrease by the same amount,the effect of the event on the ratio is "insufficient data."

Liquidity analysis is required

One measure of a company's overall long-term financial health is the debt-to-equity 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. The current ratio for 2018 is

What is the best way to assess solvency? Explain.

Since almost all debts require payment with quick assets,the quick ratio is more useful than the cash flow from operations to current liabilities ratio.

Back Company sold merchandise on credit.Its gross profit ratio is 23%.The effect of this transaction is that the

Which of the following formulas gives the inventory turnover ratio?

In the numerator of the debt service coverage ratio,__________ is a good substitute for cash flow from operations before interest and tax payments,especially where changes in these accounts are insignificant.

The concept of leverage is that

If two companies in the same industry use different methods to value inventory,this makes comparisons more difficult but not impossible.