Exam 15: Financial Statement Analysis

When comparing one company to another, what kind of information does the gross profit percentage provide?

Peartree Company provides the following data: BALANCE SHEET Dec 31,2014 Dec 31,2013 Cash \ 21,000 \ 18,000 Accounts receivable, net 31,000 35,000 Inventory 53,000 25,000 PP\&E, net 120,000 90,000 Total assets \ 225,000 \ 168,000 Additional information: • Net sales (all on account): $240,000 • Cost of goods sold: $110,000 • Interest expense: $1,000 • Net income: $49,000 How much is the return on total assets for 2014?

The accounts receivable turnover is used for which kind of evaluation?

The debt-to-equity ratio is used for which kind of evaluation?

Please refer to the following data: Which of the following is a valid conclusion from the above data?

The current ratio is widely used to measure a company's ability to pay current liabilities.

The excess of a company's current assets over current liabilities is called working capital.

If an analyst wishes to see how a company's net income as a percentage of net sales has changed from one year to the next, a vertical analysis would be the most appropriate approach.

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014. Account 2014 2013 Current assets \ 65,000 \ 50,000 Accounts receivable 80,000 75,000 Merchandise inventory 50,000 40,000 Current liabilities 75,000 50,000 Long-term liabilities 30,000 50,000 Common stock 50,000 40,000 Retained earnings 40,000 25,000 Net sales revenue \ 525,000 \ 500,000 Cost of goods sold 400,000 395,000 Gross profit \ 125,000 \ 105,000 Selling and general expenses 45,000 50,000 Net income before income tax expense \ 80,000 \ 55,000 Income tax expense \ 24,000 16,500 Net income \ 56,000 \ 38,500 - What would a horizontal analysis report with respect to current liabilities?

Please complete the vertical analysis on the balance sheet data in the format below:

Olivera Company provides the following data for the year 2013: Net sales revenue \ 398,000 Cost of goods sold \ 255,000 Operating expenses \ 95,000 Income tax expense \ 9,000 - On a vertical analysis, what percentage would be shown for income tax expense?

Please refer to the vertical analysis of a section of a balance sheet, shown below: (Dollar amounts in millions) 2014 2013 Amount \% of Total Amount \% of Total Assets Current assets: Cash \ 10,000 3.7\% \ 7,200 2.9\% Accounts receivable, net 15,600 5.7\% 16,800 6.7\% Inventory 38,000 13.9\% 31,000 12.4\% Total current assets 63,600 23.2\% 55,000 22.0\% Property, plant and equipment, net 195,000 71.3\% 168,000 67.2\% Other long-term assets 15,000 5.5\% 27,100 10.8\% Total assets \ 273,600 100.0\% \ 250,100 100.0\% -Which of the following statements is valid regarding the data shown above?

The rate of return on total assets is a way to measure a company's profitability.

Days' sales in receivables is a measure of a company's ability to collect receivables.

The current ratio is used for which kind of evaluation?

A company reported the following amounts of net income: 2011 \ 18,000 2012 \ 24,000 2013 \ 26,000 - Which of the following is the percentage change in net income from 2012 to 2013?

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014. Account 2014 2013 Current assets \ 65,000 \ 50,000 Accounts receivable 80,000 75,000 Merchandise inventory 50,000 40,000 Current liabilities 75,000 50,000 Long-term liabilities 30,000 50,000 Common stock 50,000 40,000 Retained earnings 40,000 25,000 Net sales revenue \ 525,000 \ 500,000 Cost of goods sold 400,000 395,000 Gross profit \ 125,000 \ 105,000 Selling and general expenses 45,000 50,000 Net income before income tax expense \ 80,000 \ 55,000 Income tax expense \ 24,000 16,500 Net income \ 56,000 \ 38,500 - What would horizontal analysis report with respect to selling and general expenses?

The following is a summary of information presented on the financial statements of The Cake Company on December 31, 2014. Account 2014 2013 Current assets \ 65,000 \ 50,000 Accounts receivable 80,000 75,000 Merchandise inventory 50,000 40,000 Current liabilities 75,000 50,000 Long-term liabilities 30,000 50,000 Common stock 50,000 40,000 Retained earnings 40,000 25,000 Net sales revenue \ 525,000 \ 500,000 Cost of goods sold 400,000 395,000 Gross profit \ 125,000 \ 105,000 Selling and general expenses 45,000 50,000 Net income before income tax expense \ 80,000 \ 55,000 Income tax expense \ 24,000 16,500 Net income \ 56,000 \ 38,500 - What would horizontal analysis report with respect to long-term liabilities?

Portofino Company provides the following comparative balance sheet data. Please complete a horizontal analysis using the format shown here:

The rate of return on net sales is used for which kind of evaluation?