Exam 13: Analysis of Financial Statements

________ financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios?

Jones Corp. reported current assets of $193,000, current liabilities of $137,000, and total liabilities of $275, 714 on its most recent balance sheet. The current ratio is:

Clairmont Industries reported net income of $283,000, average total assets of $637,000, and comprehensive income of $354,172. The return on total assets is:

Standards for comparison when interpreting financial statements include competitor and industry performance data.

The comparison of a company's financial condition and performance to a base amount is known as:

The comparative balance sheet for Silverlight Co. is shown below. Express the balance sheet in common-size percentages.

Auditors use financial statements to assess "fair presentation" of financial results.

Use the following selected information from Whitman Corp. to determine the Year 1 and Year 2 trend percentages for net sales using Year 1 as the base. Year 2 Year 1 Net sales \ 276,200 \ 231,400 Cost of goods sold 151,900 129,590 Operating expenses 55,240 53,240 Net earnings 27,820 19,820

One purpose of financial statement analysis for internal users is to provide information to improve efficiency and effectiveness.

The measurement of key relations among financial statement items is known as:

Current assets divided by current liabilities is the:

Powers Company reported net sales of $1,200,000, average Accounts Receivable, net of $78,500, and net income of $51,025. The accounts receivable turnover ratio is:

Explain the purpose of financial statement analysis for both external and internal users.

Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

Annual cash dividends per share divided by market price per share is the:

Refer to the following selected financial information from Texas Electronics. Compute the company's acid-test ratio 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

Refer to the following selected financial information from Troy Manufacturing. Compute the company's working capital. Current Assets 306,450 Plant assets 338,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000

Carducci Corporation reported net sales of $3.6 million, average total assets of $1.1 million, and net income of $847,000. The total asset turnover is:

If a company is comparing this year's financial performance to last year's financial performance, it is using horizontal analysis.