Exam 13: Analysis of Financial Statements

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is equal to the:

A company had a profit margin of 12%.If net income equaled $450,000 and average total assets equaled $600,500,how much were sales?

Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash \ 25,868 \ 31,163 \ 31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets,net 241,854 218,932 199,542 Total assets \4 49,206 \3 85,680 \3 21,400 Liabilities and Equity Accounts payable \ 108,058 \ 67,135 \ 42,849 \ Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, \ 10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity \ 449,206 \ 385,680 \ 321,400 What is Corona Company's debt to equity ratio for 2013?

The following selected company information was reported: Accounts receivable, beginning-year \ 170,000 Accounts receivable, year-end 190,000 Merchandise inventory, beginning-year 80,000 Merchandise inventory, year-end 60,000 Cost of goods sold 580,000 Credit sales 1,000,000 Calculate the following company ratios: (a)Accounts receivable turnover (b)Inventory turnover (c)Days' sales uncollected

Describe the purpose of horizontal financial statement analysis and how it is applied.

Common-size statements:

The comparative balance sheet for Golden Co.is shown below.Express these amounts in a comparative,common-size balance sheet. GOLDEN COMPANY Comparative Balance Sheets (in \ 000 ) December 31, 2012-2014 2012 2013 2014 Cash \ 49.6 \ 34.2 \ 35.7 Accounts receivable 74.4 85.5 76.5 Merchandise inventory 148.8 125.4 91.8 Plant assets (net) Total assets \ 620.0 \ 570.0 \ 510.0 Accounts payable \ 117.8 \ 51.3 \ 76.5 Bonds payable 130.2 159.6 107.1 Common stock 266.6 279.3 265.2 Retained earnings Total liabilities and equity \ 620.0 \ 570.0 \ 510.0

Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100% are called:

A company has sales of $5,417,000,a gross profit ratio of 35%,ending merchandise inventory of $201,425,and total current assets of $1,539,600.What is the days sales' in inventory ratio for the year?

A financial statement analysis report should include a brief table of contents to help users focus on those areas most relevant to their decisions.

Corona Company's balance sheet accounts follow: At December 31 2014 2013 2012 Assets Cash \ 25,868 \ 31,163 \ 31,182 Accounts receivable, net 78,034 53,995 41,152 Merchandise inventory 95,120 73,491 46,095 Prepaid expenses 8,330 8,099 3,429 Plant assets,net 241,854 218,932 199,542 Total assets \4 49,206 \3 85,680 \3 21,400 Liabilities and Equity Accounts payable \ 108,058 \ 67,135 \ 42,849 \ Long-term notes payable secured by mortgages on plant assets 85,791 87,819 71,029 Common stock, \ 10 par value 162,500 162,500 162,500 Retained earnings 92,857 68,226 45,022 Total liabilities and equity \ 449,206 \ 385,680 \ 321,400 What is Corona Company's accounts receivable turnover ratio for 2013,assuming net sales for the period were $1,236,783?

The return on total assets can be calculated as the profit margin times the total asset turnover.

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Horizontal analysis:

For the following financial statement items,calculate trend percents using 2010 as the base year: 2014 2013 2012 2011 2010 Sales \ 1,195,400 \ 1,118,000 \ 1,049,000 \ 963,200 \ 860,000 Cost of sales 752,400 704,000 671,000 616,700 559,000 Gross profit \ 443,000 \ 414,000 \ 378,000 \ 346,500 \ 301,000

Express the following income statement information in common-size percents and in trend percents using 2013 as the base year.

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is equal to the:

The comparison of a company's financial condition and performance to a base amount is known as _____________________________.

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Comparative calendar-year financial data for a company are shown below: 2014 2013 Sales \ 720,000 \ 607,500 Cost of goods sold 450,000 382,700 Operating expenses 168,500 134,900 Net income 51,200 51,700 December 31, December 31, 2014 2013 Accounts receivable (net \ 157,500 \ 162,500 Inventory 139,500 110,500 Total assets 1,012,500 944,800 Calculate: (1)Accounts receivable turnover for 2014. (2)Days' sales uncollected for 2014. (3)Inventory turnover for 2014. (4)Days' sales in inventory for 2014.