Exam 13: Analysis of Financial Statements

Comparative calendar year financial data for a company are shown below: 2014 2013 Sales \ 720,000 \ 607,500 Gross profit 270,000 224,800 Income before taxes 79,200 78,700 Net income 51,200 51,700 December 31 December 31 2014 2013 Liabilities \ 493,500 \ 452,500 Common stock ( \ 12 par) 180,000 180,000 Contributed capital in excess of par 135,000 135,000 Retained earnings 204,000 177,300 Total liabilities and equity \ 1.012,500 \ 944,800 Calculate: (1)Return on total assets for 2014. (2)Return on common stockholders' equity for 2014.

The "cumulative effect of a change in accounting principles" is shown below the extraordinary items section on the income statement.

A company can change from one acceptable accounting principle to another as long as the change __________________________________________ in its financial statements.

The debt ratio,the equity ratio,pledged assets to secured liabilities,and times interest earned are all ___________________ ratios.

Efficiency refers to how productive a company is in using its assets and is usually measured relative to how much revenue is generated from a certain level of assets.

A company has a current ratio of 1.92,total liabilities of $193,849,long-term notes payable of $85,791,and a quick ratio of .96.What are total current assets for the company?

The measurement of key relationships between financial statement items is known as _____________________________.

A rough guideline states that for a company with no discounts offered,days' sales uncollected should not exceed 1⅓times the days in its credit period.

The comparison of a company's financial condition and performance across time is known as ________________________________.

The ability to generate future revenues and meet long-term obligations is referred to as:

A company's calendar-year financial data are shown below.The company has pledged all of its net plant assets as security for its long-term notes payable: Sales \ 650,000 Cost of goods sold 422,500 Gross profit \ 227,500 Operating expenses Operating income \ 87,000 Interest expense 9,100 Income before taxes \ 77,900 Income taxes 23,400 Net income \ 54,500 Cash \ 19,500 Accounts receivable (net) 65,000 Inventory 71,500 Plant assets (net) 195,000 Total assets \ 351,000 \ 74,100 Current liabilities Long-term notes payable 97,500 Common stock 65,000 Retained earnings Total liabilities and equity \ 351,000 Calculate the following ratios for this company: (a)Equity ratio. (b)Pledged assets to secured liabilities ratio. (c)Times interest earned.

Express the following income statement information in common-size percents (round to nearest whole percent).Comment on the results. THORSTEN CORP Comparative Income Statement For Years Ended December 31, 2014 and 2013 2014 2013 Sales \ 1,200,000 \ 1,000,000 Cost of goods sold Gross profit \ 396,000 \ 350,000 Selling expenses 132,000 120,000 Administrative expenses 180,000 150,000 Net income \ 84,000 \ 80,000

The measurement of key relations among financial statement items is known as:

A company's balance sheet and income statement accounts follow: At December 31 2014 2013 2012 Assets Cash \ 30,872 \ 36,086 \ 37,974 Accounts receivable, net 89,476 63,151 50,632 Merchandise inventory 112,499 83,450 54,467 Prepaid expenses 9,942 9,473 4,219 Plant assets, net 291,143 268,126 244,108 Total assets \ 533,932 \ 460,286 \ 391,400 Liabilities and Equity Accounts payable \ 130,290 \ 76,233 \ 50,632 Long-term notes payable secured by mortgages on plant assets 98,372 103,748 107,769 Common stock, \ 10 par value 142,500 132,500 102,500 Retained earnings 182,770 147,805 130,499 Total liabilities and equity \ 533,932 \ 460,286 \ 391,400 What is the company's profit margin ratio for 2014?

Intracompany standards for financial statement analysis:

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

Profitability is the company's ability to generate future revenues and meet long-term financial obligations.

Describe ratio analysis including its purpose,application,and interpretation.

Calculate the percent increases for each of the following selected balance sheet items. 2014 2013 Cash \ 569 \ 448 Accounts receivable 2,234 2,337 Merchandise inventory 1,062 1,071 Plant assets 2,432 2,138 Bonds payable 1,164 1,666 Equity 2,777 2,894

Net income divided by average total assets is equal to the: