Exam 12: Performance Evaluation Revisited: a Balanced Approach

Ottoman Manufacturing Company reported net sales (all credit) of $120,000 and $140,000 for 2020 and 2021, respectively and net income of $24,000 and $32,000 for 2020 and 2021, respectively.Ottoman's 2020 and 2021 balance sheets appear below: Required: a.Calculate the working capital for 2021. b.Calculate the accounts receivable turnover for 2021. c.Calculate the debt ratio for 2021.

Generally Accepted Accounting Principles require that companies present financial statements that include the current year and two previous years.

Because an absolute dollar change does not give the whole picture, a percentage change is often included in a horizontal analysis.

The following financial statement items are shown for J&T Manufacturing. Calculate the common-size percentage for gross margin.

A firm's ability to pay its obligations as they come due and to meet any unforeseen needs for cash is referred to as liquidity.

Most companies use a combination of debt and equity to obtain the assets needed to fund operations. Required: Discuss the advantages and disadvantages of using debt versus equity financing as it relates to dividends, interest, and risk.

A form of horizontal analysis in which each year's account balance is expressed as a percentage of the base year is called

M & M Manufacturing has provided the following comparative income statements for 2021 and 2022. Required: Prepare a common-size analysis of M & M's income statement for 2022.

The current asset portion of Wilderness Outfitters, Inc.'s balance sheet is as follows (in $000s). Required: Prepare a horizontal analysis of Wilderness's current assets, rounding your answers to one decimal place.

Another form of horizontal analysis is called trend analysis.

The 2020 and 2021 partial balance sheets for Ottoman Industries is shown below: Calculate the 2021 acid-test ratio.

The following data have been taken from the records of Bubba's Body Shop for the current year: Required: a.Calculate the dividend payout ratio. b.Calculate the return on common stockholders' equity.

The 2020and 2021 balance sheets for Ottoman Manufacturing Company appear below: Required: Prepare a common-size balance sheet for 2021.

Which of the following is an advantage of a company using equity rather than debt to finance a project?

The price-earnings ratio indicates what multiple of current earnings investors are willing to pay for a share of stock.

The first step in preparing a horizontal analysis of a firm's financial statements is to break down the balance sheet to indicate which assets are expected to sold in within the next two years.

A more stringent measure of liquidity than the current ratio is referred to as

The current ratio is also referred to as the quick ratio.

Which of the following parties would be least interested in the return on assets?

The formula for the return on common stockholders' equity is