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Exam 23: Financial Statement Analysis

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Question 1

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The following financial information was taken from a firm's accounting records for 2013. Use this information to determine the items below. $\begin{array}{lrr} & \text { Jan. 1 } & {\text { Dec. } 31} \\\text { Accounts Receivable } & \$ 285,000 & \$ 418,000 \\\text { Merchandise Inventory } & 375,000 & 425,000 \\\text { Net Credit Sales } & & 3,200,000 \\\text { Gross Profit on Sales } & & 2,200,000\end{array}$ (1) Inventory turnover. (2) Accounts receivable turnover. (3) Average collection period of accounts receivable.

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1. 2.5 tim...

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Question 2

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The acid-test ratio is computed by dividing ____________________ assets by current liabilities.

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-Using the information shown, prepare a vertical analysis. Carry all calculations to two decimal places and then round to one decimal place. (Leave all percentages unadjusted.)

If current liabilities are $90,000, long-term liabilities are $270,000, and total assets are $600,000, what is the percentage of total liabilities to total assets?

Quick assets include cash, receivables, and inventories.

-Using the information given below, calculate the gross profit percentage based on net sales. What conclusions can be made about this company based on this trend analysis?

You are a loan officer with Scotia Bank. Select at least two of the ratios listed as most useful to you for a decision regarding providing loan proceeds to DC, Inc. and AR, Inc. companies? What additional ratios would you request? Why? Ratios: Working Capital Current Ratio Acid Test Ratio Inventory Turnover Accounts Receivable Turnover

The following financial information was taken from a Unit Sales Inc.'s accounting records on December 31, 2013. Use this information to determine the items below. $\begin{array} { l r } \text { Net Sales } & \$ 1,200,000 \\\text { Gross Profit on Sales } & 400,000 \\\text { Net Income Before Income Tax } & 66,000 \\\text { Income Tax Expense } & 21,000 \\\text { Net Income After Income Tax } & 45,500 \\\text { Total Assets } & \$ 800,000\end{array}$ (1) Rate of return on net sales. (2) Rate of return on total assets. (3) Asset turnover.

The rate of return on net sales is a basic measure of operating efficiency and ___________________.

-Using the information given, analyze the profitability ratios of Quotidian Industries for 2013.

A company reported an expense of $30,000 for the current year that was $6,000 higher than the previous year. The increase from last year to this year was ____________________ percent.

On a comparative balance sheet that shows horizontal analysis, the percentage of change in total assets must equal the percentage of change in total liabilities and stockholders' equity.

In vertical analysis of the balance sheet, each item is expressed as a percentage of

A decrease in cost of goods sold from 46.5% to 45.0% from 2012 to 2013 indicates a favorable long-term trend.

-Using the information given, analyze the financial strength of Quotidian Industries for 2013.

The yield on common stock is computed by dividing the dividend per share of common stock by the current ____________________ price of the share.

What is a ratio that measures financial strength?

In vertical analysis, it is customary to express each item on the balance sheet as a percentage of total liabilities.

A comparison of data for the current period with the same data of the company for previous periods is called ____________________ analysis.

The following financial information was taken from a firm's accounting records on December 31, 2013. Use this information to determine the items below. $\begin{array}{lr}\text { Net Sales } & \$ 400,000 \\\text { Net Income Before Income Tax } & 25,000 \\\text { Income Tax Expense } & 3,750 \\\text { Net Income After Income Tax } & 21,250 \\\text { Total Assets } & 160,000\end{array}$ (1) Rate of return on net sales. (2) Rate of return on total assets. (3) Asset turnover.