Exam 13: Analysis of Financial Statements

Zhang Company reported Cost of goods sold of $835,000, average Inventory of $41,750, and Net sales of $2,338,000. The Inventory turnover ratio is:

Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:

Net sales divided by average accounts receivable, net is the:

The ability to meet short-term obligations and to efficiently generate revenues is called:

The evaluation of company performance and financial condition includes evaluation of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

The return on total assets can be calculated as profit margin times total asset turnover.

Use the following information from the current year financial statements of a company to calculate the ratios below: (a) Current ratio. (b) Accounts receivable turnover. (Assume the prior year's accounts receivable balance was $100,000.) (c) Days' sales uncollected. (d) Inventory turnover. (Assume the prior year's inventory was $50,200.) (e) Times interest earned ratio. (f) Return on common stockholders' equity. (Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.) (g) Earnings per share (assuming the corporation only has common stock outstanding). (h) Price earnings ratio. (Assume the company's stock is selling for $26 per share.) (i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash dividends.)

Intra-company standards for financial statement analysis:

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

External users of financial information:

Net income divided by net sales is the:

The measurement of key relationships between financial statement items is known as ________.

Stark Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is:

The following selected financial information for a company was reported for the current year end. Calculate the following company ratios: (a) Accounts receivable turnover. (b) Inventory turnover. (c) Days' sales uncollected Accounts receivable, beginning-year $170,000 Accounts receivable, year-end 190,000 Merchandise inventory, beginning-year 80,000 Merchandise inventory, year-end 60,000 Cost of goods sold 580,000 Credit sales 1,000,000

Horizontal analysis:

A company's calendar-year financial data are shown below. The company had total assets of $339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of $19,500 were paid during the year. Calculate the following ratios for the company: (a) profit margin ratio (b) gross margin ratio (c) return on total assets (d) return on common stockholders' equity (e) book value per common share (f) basic earnings per share (g) price earnings ratio (h) dividend yield.

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Refer to the following selected financial information from Gomez Electronics. Compute the company's debt-to-equity ratio for Year 2. Year 2 Year 1 Net sales \ 478,500 \ 426,250 Cost of goods sold 276,300 250,120 Interest expense 9,700 10,700 Net income before tax 67,250 52,680 Net income after tax 46,050 39,900 Total assets 317,100 288,000 Total liabilities 181,400 167,300 Total equity 135,700 120,700

Common-size statements:

Refer to the following selected financial information from Texas Electronics. Compute the company's accounts receivable turnover for Year 2. Year 2 Year 1 Cash \ 37,500 \ 36,850 Short-term investments 90,000 90,000 Accounts receivable, net 85,500 86,250 Merchandise inventory 121,000 117,000 Prepaid expenses 12,100 13,500 Plant assets 388,000 392,000 Accounts payable 113,400 111,750 Net sales 711,000 706,000 Cost of goods sold 390,000 385,500