Exam 13: Analyzing and Interpreting Financial Statements

What is the purpose of a good financial statement analysis report? What are the key components?

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

Extraordinary items:

A company has sales of $2,458,422,a gross profit ratio of 23%,a days' sales in inventory ratio of 12.4,and total current assets of $539,600.What is the ending inventory for the year?

The use of horizontal and vertical analysis eliminates many differences between GAAP and IFRS,but the user must exercise some caution when drawing conclusions from these reports.

Financial statement analysis can be used for personal investment decisions.

Trend percentage is calculated by dividing _________________________ by ___________________________ and multiplying the result by 100.

Extraordinary items are reported in the operating section of the income statement.

Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.

A company can change from one acceptable accounting principle to another as long as the change improves the usefulness of information in its financial statements.

A company's sales in 2009 were $280,000 and its sales in 2010 were $341,600.Using 2009 as the base year,what is the sales trend percent for 2010?

The following information is from Omega Corporation's balance sheets as of December 31,2010 and 2011 and its income statement for 2011: 2011 2010 Assets: Cash \ 18,000 \ 22,000 Marketable securities 25,000 0 Accounts receivable 38,000 42,000 Inventory 61,000 52,000 Prepaid insurance 6,000 9,000 Long-term investments 49,000 20,000 Plant assets, net 218,000 225,000 Total assets \ 415,000 \ 370,000 Net income \ 62,250 Sales (all on credit) 305,000 Cost of goods sold 123,000 Interest expense 15,600 Income tax expense 27,000 From the above information,calculate the following ratios for 2011: (a)Inventory turnover. (b)Accounts receivable turnover. (c)Return on total assets. (d)Times interest earned. (e)Total asset turnover.

Simple Simon's balance sheet and income statement accounts follow: At December 31 2011 2010 2009 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 98,372 103,748 107,769 mortgages on plant assets 142,500 132,500 102,500 Common stock, \ 10 par value 182,770 147,805 130,499 Total liabilities and equity \5 33.932 \4 60,286 \3 91,400 What is Simple Simon's gross margin ratio for 2010?

Net sales divided by average accounts receivable is equal to the:

Which of the following financial statements sections includes information on the background on a company,its industry and its economic setting?

Explain the form and content of a complete income statement.

Simple Simon's balance sheet and income statement accounts follow: At December 31 2011 2010 2009 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 98,372 103,748 107,769 mortgages on plant assets 142,500 132,500 102,500 Common stock, \ 10 par value 182,770 147,805 130,499 Total liabilities and equity \5 33.932 \4 60,286 \3 91,400 What is Simple Simon's return on common stockholders' equity ratio for 2010?

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