Exam 5: Analyzing and Interpreting Financial Statements

Selected balance sheet and income statement information for jewelry retailer, Sparkle & Co. for 2014 through 2016 follows: A. Compute the current ratio for each year and discuss any trends. Do you feel that the company is sufficiently liquid? Explain. What additional information might be helpful in analyzing the liquidity? B. Compute times interest earned for each year and discuss any trends. Do you have any concerns about its level of financial leverage and its ability to meet interest obligations? Explain.

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute the profit margin, to the nearest hundredth of a percent.

Selected 2016 balance sheet and income statement information for two large communication companies, Vista Communication, Inc., and American Phone, Inc., follow: A. Compute accounts receivable turnover for Vista Communications Inc. and American Phone. B. Interpret and comment on the differences between the receivables turnover rates between each company assuming the industry average is 9.0 times.

When determining forecasted revenues for proforma purposes, managers should consider economic conditions, potential company changes, and changes in the company's competitive environment.

Asset turnover measures a company's profitability.

K Grocers' 2016 financial statements show total operating assets of $45,004 million, total operating liabilities of $22,690 million, and net income totaling $1,505 million. How much are K Grocers' net operating assets (NOA) for the year?

All else being equal, a higher financial leverage will increase a company's debt rating and decrease the interest rate it must pay.

Peter Gilgen & Co.'s (PG & Co.) recent balance sheet (fiscal year 2016) reported average equity of $112,036 and average total assets of $240,598. Assume that the company's statutory tax rate is 35%. PG & Co.'s recent income statement showed the following): A. Calculate the income tax rate on earnings before income taxes. B. How much is EWI? C. Calculate ROE and ROA.

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute asset turnover, to the nearest hundredth of a percent.

Which one of the following is not true concerning return on net operating assets?

Selected 2016 balance sheet and income statement information for two manufacturing companies: Canyonlands, Inc. and Bryce Corporation follows: A. Calculate the current ratio and quick ratio for both companies. B. Which company is more liquid? C. Calculate the times interest earned and debt-to-equity ratio for both companies. D. Which company is more solvent?

If Company A is more profitable than Company B, then Company A will have a higher RNOA than Company B.

The balance sheets for Bullseye Corporation for the fiscal years 2015 and 2014, (years ending January 30, 2016 and January 31, 2015, respectively) follow: A. Prepare a common-size statements for the asset section of Bullseye's balance sheet for FY 2015 and FY 2014. B. Comment on the most significant changes.

Liquidity analysis of a company includes the following useful measures: (select all that apply)

Selected 2016 balance sheet and income statement information from Trunk, Inc. and Taylor S. follows: A. Compute the following turnover rates for each company: 1. Accounts receivable turnover 2. Inventory turnover 3. Asset turnover B. Interpret and comment on any differences you observe between the turnover rates for these two companies. What are some characteristics of their respective businesses that would likely lead to the differences identified?

Which one of the following ratios does not involve assets?

The times interest earned ratio reflects the number of times that the company earned interest during the year.

All things equal, increasing turnover, increases:

Which ratio provides an indication of the salability of the company's products?

Walkie Enterprises reported sales revenue totaling $1,120,000, $1,340,000, and $1,675,000 in the years, 2014, 2015, and 2016, respectively. Performing horizontal analysis, what is the percentage change for 2016?