Exam 17: Financial Statement Analysis

An accounts receivable turnover that is too high may indicate that credit is too tight,causing the loss of sales to good customers.

Data for Martin Corp.and Tante,Inc.follow: Martin Tante Net Sales \ 25,000 \ 32,500 Cost of Goods Sold 18,500 22,360 Other Expenses 2,150 5,000 Net Income \ 4,350 \ 5,140 Prepare a comparative common-size income statement for each company for the year ending December 31,2019.Round to two decimal places.Use a multi-step format for the income statement.

The vertical analysis of the income statement of Settler,Inc.is as shown below: The 20% shown for net income in 2019 signifies that net income ________.

Analysts look for red flags in financial statements that may signal financial trouble.Which of the following is a red flag that suggests that a company may be in trouble?

An annual report provides information about a company's financial condition.

Provide a description of the contents of each of the following components of the annual report. Annual Report Component Description of the contents MD\&A Notes to financial statements

Days' sales in receivables measures the return on average receivables.

The times-interest-earned ratio measures the number of times earnings before interest and taxes can cover interest expense.

MacMan,Inc.reported the following data: 2019 2018 Amount Percentage Revenues \ 6370 \ 4980 \ 1390 27.91\% Cost of goods sold 3370 34.80\% Gross profit 3000 2480 520 20.97\% Operating expenses: Sales and marketing expense 730 630 100 15.87,00\% General and administrative 420 440 -20 -4.55\% expenses Research and development expense 470 410 60 14.63\% Other expense 430 730 (300) (41.10)\% Total operating expenses 2210 (160) (7.24)\% Income before income tax 950 270 680 251.85\% Income tax expense \ 10 4\% Net income (loss) \ 690 \ 20 \ 670 3350\% The horizontal analysis shows that cost of goods sold has ________.(Round your answer to two decimal places.)

Use the balance sheet of Michigan,Inc.to calculate working capital for 2019 and 2018. Assets $\text {Michigan, Inc.}$ $\text {Comparative Balance Sheet}$ $\text {December 31, 2019 and 2018}$ 2019 2018 Total Current Assets \ 200,000 \ 100,000 Property, Plant, and Equipment, Net 550,000 500,000 Other Assets Total Assets \ 800,000 \ 650,000 Liabilities Total Current Liabilities \ 150,000 \ 100,000 Long-term Debt Total Liabilities \ 500,000 350,000 Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity \ 800,000 \ 650,000

The audit report in the annual report attests to the fairness of the presentation of the financial statements.

There are three main ways to analyze financial statements.Which of the following does NOT represent one of these ways of analyzing financial statements?

Glasgow,Inc.provides the following: Glasgow, Inc. Comparative Balance Sheet December 31,2019 and 2018 2019 2018 Assets Total Current Assets \ 200,000 \ 100,000 Property, Plant, and Equipment, Net 550,000 500,000 Other Assets 50,000 50,000 Total Assets \ 800,000 \ 650,000 Liabilities Total Current Liabilities \ 150,000 \ 100,000 Long-term Liabilities 350,000 250,000 Total Liabilities 500,000 350,000 Stockholders' Equity Total Stockholder's' Equity 300,000 Total Liabilities and Stockholder's' Equity \ 800,000 \ 650,000 Perform a vertical analysis of Glasgow's balance sheet for each year.(Round to one decimal place.)

The financial statements for Uptown Service Company include the following items: 2019 2018 Cash \ 50,500 \ 47,000 Short-term Investments 27,000 18,000 Net Accounts Receivable 61,000 51,000 Merchandise Inventory 161,000 46,000 Total Assets 535,000 548,000 Accounts Payable 127,500 129,000 Salaries Payable 16,000 16,000 Long-term Note Payable 60,000 57,000 Compute working capital for 2019.

The price/earnings ratio shows the ________.

If the debt ratio is too high,the company may be unable to pay its debts.

Which of the following items is a measure of a company's ability to collect receivables?

Ketchen,Inc.provides the following information for 2018: Net income \ 270,000 Market price per share of common stock \ 55 per share Dividends paid \ 180,000 Common stock outstanding at Jan. 1,2018 160,000 shares Common stock outstanding at Dec. 31,2018 240,000 shares The company has no preferred stock outstanding.Calculate the price/earnings ratio of common stock.(Round any intermediate calculations and your final answer to two decimal places.)

Data for Kahn,Inc.follows: Kahn, Inc. Comparative Income Statement Years Ended Dec. 31, 2019 and 2018 2019 2018 Net Sales Reverue \ 550,000 \ 500,000 Expenses: Cost of Goods Sold 245,000 220,000 Selling and Administrative Expenses 100,000 96,000 Other Expenses (Interest Expense) 12,000 9,000 Income Tax Expense Total Expenses \ 372,000 Net Income \ 135,000 \ 128,000 Prepare a horizontal analysis of the comparative income statement of Kahn,Inc.(Round to one decimal place.)Use a multi-step format for the income statement.

In an audit report in the annual report,a qualified opinion states that the financial statements are presented fairly in all material respects.