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Exam 13: Analyzing and Interpreting Financial Statements

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Question 21

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Use the balance sheets of Glover shown below to calculate the following ratios for Year 2 (round to the hundredths): (a)Current ratio. (b)Acid-test ratio. (c)Debt ratio. (d)Equity ratio.

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Question 22

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________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

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Question 23

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A company's calendar-year financial data are shown below.The company had total assets of $339,000 and total equity of $144,400 for the prior year.No additional shares of common stock were issued during the year.The December 31 market price per share is $49.50.Cash dividends of $19,500 were paid during the year.Calculate the following ratios for the company: (a)profit margin ratio (b)gross margin ratio (c)return on total assets (d)return on common stockholders' equity (e)book value per common share (f)basic earnings per share (g)price earnings ratio (h)dividend yield.

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

What are the four standards for comparisons in financial analysis? Give an example of each.

A common focus of financial statement users in evaluating a company's performance and financial condition includes evaluating its (1)________,(2)________,and (3)________.

Analysis of a single financial number is often of limited value.

Comparative statements for Warmer Corporation are shown below: Calculate trend percentages for all income statement amounts shown and comment on the results.Use 2016 as the base year.Comment on the results.

External users of accounting information manage and operate the company.

Refer to the following selected financial information from Marston Company.Compute the company's days' sales uncollected for Year 2.(Use 365 days a year.) $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \\\text { Accounts receivable, net } & 86,500 & 82,750 \\\text { Net sales }& 723,000 & 693,000\end{array}$

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

Horizontal analysis:

Refer to the following selected financial information from McCormik,LLC.Compute the company's working capital for Year 2. $\begin{array} { l r r } & { \text { Year 2 } } & \text { Year 1 } \\\text { Cash } & \$37,500 & \$ 36,850 \\\text { Short-term irvestrnents }& 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchardise irventory } & 121,00 0 & 117,000 \\\text { Prepaid experses } & 12,100 & 13,500 \\\text { Plart assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,40 0 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold }& 390,000 & 385,500\end{array}$

A good financial statement analysis report usually includes the following six sections: (1)________,(2)________,(3)________,(4)________ (5)________,and (6)________.

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals 21.4%.

Calculate the percent increase or decrease for each of the following financial statement items:

Refer to the following selected financial information from McCormik,LLC.Compute the company's days' sales in inventory for Year 2.(Use 365 days a year.) $\begin{array} { l r r } & { \text { Year 2 } } & \text { Year 1 } \\\text { Cash } & \$37,500 & \$ 36,850 \\\text { Short-term irvestrnents }& 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchardise irventory } & 121,00 0 & 117,000 \\\text { Prepaid experses } & 12,100 & 13,500 \\\text { Plart assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,40 0 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold }& 390,000 & 385,500\end{array}$

All of the following statements regarding a business segment are true except:

General-purpose financial statements include the (1)income statement,(2)balance sheet,(3)statement of stockholders' equity (or statement of retained earnings),(4)statement of cash flows,and (5)notes to these statements.

A corporation reports the following year-end balance sheet data.The company's current ratio equals: $\begin{array} { l r l r r } \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \\\text { Accourts receivable } & 55,000 & \text { Long-temn liabilities } & 35,000 \\\text { Irventory } & 60,000 & \text { Cormon stock } & 100,000 \\\text { Equiprment } & \underline{145,000} & \text { Retaired earnirgs } & \underline{90,000} \\\text { Total assets } & \underline{\$ 300,000} & \text { Total liabilities ard equity } & \underline{\$ 300,000}\end{array}$