Exam 13: Analysis of Financial Statements

The market price of Shaw Corporation's common stock is $47.50. Shaw declared and paid cash dividends of $3.28 per share and had earnings per share of $6.89. The Dividend yield ratio is:

Refer to the following selected financial information from Winterfell Company. Compute the company's debt to equity for Year 2. Year 2 Year 1 Total assets \ 327,800 \ 301,000 Total liabilities 171,400 169,300 Total equity 156,400 131,700

Selected current year company information follows: Net income \1 5,953 Net sales 712,855 Total liabilities, beginning-year 83,932 Total liabilities, end-of-year 103,201 Total stockholders' equity, beginning-year 198,935 Total stockholders' equity, end-of-year 121,851 The total asset turnover is:

Express the following balance sheets for Safety Company in common-size percentages. Safety Company Balance Sheets For the years ended December 31 Year 2 Year 1 Assets Cash \ 43,000 \ 22,000 Accounts receivable 38,000 42,000 Merchandise inventory 61,000 52,000 Prepaid insurance 6,000 9,000 Long-term investments 49,000 20,000 Plant assets (net) 218,000 218,000 Total assets \ 415,000 \ 363,000 Liabilities and Equity Current liabilities \ 62,000 \ 75,000 Long-term liabilities 45,000 36,000 Common stock 150,000 150,000 Retained earnings 158,000 102,000 Total liabilities and equity \ 415,000 \ 363,000

The evaluation of company performance and financial condition focuses solely on past performance.

Refer to the following selected financial information from Texas Electronics. Compute the company's current 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

What is the purpose of a good financial statement analysis report? What are the key components?

If a company is comparing its financial condition or performance to a base amount, it is using vertical analysis.

The ability to generate positive market expectations is called:

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

Selected balances from a company's financial statements are shown below. Calculate the following ratios for Year 2: (a) accounts receivable turnover (b) inventory turnover (c) days' sales uncollected (d) days' sales in inventory (d) profit margin. (e) return on total assets.

Refer to the following selected financial information from Texas Electronics. Compute the company's inventory 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

A corporation reports the following year-end balance sheet data. The company's equity ratio equals: Cash \ 40,000 Current liabilities \ 5,000 Accounts receivable 55,000 Long-term liabilities 35,000 Inventory 60,000 Common stock 100,000 Equipment 145,000 Retained earnings 90,000 Total assets \ 300,000 Total liabilities and equity \ 300,000

General-purpose financial statements include the (1) income statement, (2) balance sheet, (3) statement of stockholders' equity (or statement of retained earnings), (4) statement of cash flows, and (5) notes to these statements.

The greater the times interest earned ratio, the greater the risk a company will not be able to pay interest expense.

Horizontal analysis is the comparison of a company's financial condition and performance across time.

The ability to provide financial rewards sufficient to attract and retain financing is called:

Three of the most common tools of financial analysis are (1) ________, (2) ________, and (3) ________.

Trend analysis is computing percents that show patterns in data across periods.

The current ratio and acid-test ratio are used to reflect the ________ of a business.