Exam 17: Financial Statement Analysis

The horizontal analysis of the balance sheet shows the changes in net sales and net income.

List the three ways to analyze financial statements.State what each of these ways provides to investors and creditors.

Elephant,Inc.'s cost of goods sold for the year is $1,900,000,and the average merchandise inventory for the year is $132,000.Calculate the inventory turnover ratio of the company.(Round your answer to two decimal places.)

Management's discussion and analysis of financial condition and results of operations section of the annual report is the company's attempt to explain its financial statements and discuss its performance.

The financial statements for Stephens' Electric Company include the following items: 2019 2018 Cash \ 59,000 \ 56,000 Cash Equivalents 21,500 18,000 Net Accounts Receivable 25,000 36,000 Merchandise Inventory 78,000 68,000 Total Assets 526,000 549,000 Accounts Payable 41,500 42,000 Salaries Payable 17,000 17,000 Long-term Note Payable 56,000 52,000 Income From Operations 134,500 112,000 Interest Expense 35,000 26,000 Compute the 2018 cash ratio.(Round your answer to two decimal places.)

Ratio analysis ________.

Common-size statements ________.

The trend analysis report of Marswell,Inc.is given below (in millions): 2019 2018 2017 2016 2015 Net income \ 650 \ 602 \ 460 \ 403 \ 401 Trend percentages 162\% 150\% 115\% 100\% 100\% Which of the following is a correct conclusion from the above analysis?

Prepare a comparative common-size income statement for Clarion,Inc.for 2019 and 2018 data.(Round percentages to one decimal place.) Clarion, Inc. Compartive Inrome Statement Years Ended December 31, 2019 and 201B Net Sales \ 6,355 \ 4,920 Cost of Coods Sold Grox Profit 2,985 2,720 Operating Expenses: Selling Expenses 675 580 Administrative Expenses Total Operating Expenses Operating Income 1,900 1,715 Other Income and (Expenses): Interest Expense Total Other Income and (Expenses) Income Before Income Taxes 1,500 1,020 Income Tax Expense Net Income \ 1,270 \ 810

A horizontal analysis would be used if an analyst wants to see how the assets of a company have changed from one year to the next.

No single ratio tells the whole picture of any company's performance.

McDonald Corp.reported the following on its comparative income statement (in millions): 2019 2018 2017 Revenue \ 728 \ 675 \ 500 Cost of goods sold 312 258 220 Prepare a horizontal analysis of revenues and cost of goods sold,both in dollar amounts and in percentages,for 2019 and 2018.(Round your percentage answers to two decimal places.)

A company reports total assets of $920,000 and stockholders' equity of $540,000.Calculate the debt ratio.(Round your answer to two decimal places.)

A vertical analysis percent is computed by dividing the base amount by the specific item and then multiplying by 100.

Dollar value bias is the bias one sees from comparing numbers in relative (dollars)rather than absolute (percentage)terms.

Horizontal analysis compares the change in each statement item from one year to the next.

The financial statements of Denison Furniture Company include the following items: 2019 2018 Cash \ 60,500 \ 55,000 Short-term Investments 28,000 11,000 Net Accounts Receivable 98,000 99,000 Merchandise Inventory 164,000 149,000 Total Assets 533,000 552,000 Total Current Liabilities 233,000 219,000 Long-term Note Payable 61,000 54,000 What is the 2019 cash ratio? (Round your answer to two decimal places)

The profit margin ratio ________.

Martin Company's cost of goods sold is 40% of net sales revenue.This means that for every $1 of net sales revenue,Martin has $0.60 of gross profit.

In 2018,Spirit Company's net income was 10% of net sales revenue.In 2019,the net income was 5% of net sales revenue.There is no need for investors to be alarmed because a drop from 10% to 5% is not significant.