Exam 3: Financial Statements and Ratio Analysis

Complete the balance sheet for General Aviation, Inc. based on the following financial data. Balance Sheet General Aviation, Inc. December 31, 2005 Key Financial Data (2005) 1. Sales totaled $720,000. 2. The gross profit margin was 38.7 percent. 3. Inventory turned 6 times. 4. There are 360 days in a year. 5. The average collection period was 31 days. 6. The current ratio was 2.35. 7. The total asset turnover was 2.81. 8. The debt ratio was 49.4 percent. 9. Total current assets equal $159,565.

The Public Company Accounting Oversight Board (PCAOB)

________ analysis involves comparison of current to past performance and the evaluation of developing trends.

A firm had year end 2004 and 2005 retained earnings balances of $670,000 and $560,000, respectively. The firm paid $10,000 in dividends in 2005. The firm's net profit after taxes in 2002 was

Cross-sectional ratio analysis involves comparing the firm's ratios to those of firms in other industries at the same point in time.

The DuPont formula allows the firm to break down its return into the net profit margin, which measures the firm's profitability on sales, and its total asset turnover, which indicates how efficiently the firm has used its assets to generate sales.

The Sarbanes-Oxley Act of 2002 established the Public Company Accounting Oversight Board (PCAOB) which is a not-for-profit corporation that oversees auditors of public corporations.

The 2002 law that established the Public Company Accounting Oversight Board (PCAOB) was called

Due to inflationary effects, inventory costs and depreciation write-offs can differ from their true values, thereby distorting profits.

The McCain-Feingold Act of 2002 was passed to eliminate many of the disclosure and conflict of interest problems of corporations.

Time-series analysis is the evaluation of the firm's financial performance in comparison to other firm(s) at the same point in time.

A corporation had a year end 2004 retained earnings balance of $220,000. The firm reported net profits after taxes of $50,000 in 2005 and paid dividends in 2005 of $30,000. The firm's retained earnings balance at year end 2005 was

Using the DuPont system of analysis and holding other factors constant, an increase in financial leverage will result in ________ in the return on equity.

The two basic measures of liquidity are

The ________ ratio measures the firm's ability to pay contractual interest payments.

________ is used by financial managers as a structure for dissecting the firm's financial statements to assess its financial condition.

A firm with a total asset turnover lower than the industry standard may have

________ evidence of the existence of a problem or outstanding management performance is provided by ratio analysis.

Key Financial Data Income Statement, Dreamscape, Inc. For the Year Ended December 31, 2005 Prepare a common-size income statement for Dreamscape, Inc. for the year ended December 31, 2005. Evaluate the company's performance against industry average ratios and against last year's results.

The Sunshine Company had a retained earnings balance of $850,000 at the beginning of 2005. By the end of 2005, the company's retained earnings balance was $950,000. During 2005, the company earned $245,000 as net profits after paying its taxes. The company was then able to pay its preferred stockholders $45,000. Compute the common stock dividend per share in 2005 assuming 10,000 shares of common stock outstanding.