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A. 36.4% for Year 2 and 41.1% for Year 1.
B. 55.0% for Year 2 and 56.0% for Year 1.
C. 119.4% for Year 2 and 100.0% for Year 1.
D. 117.2% for Year 2 and 100.0% for Year 1.
E. 65.1% for Year 2 and 64.6% for Year 1.
120. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s working capital for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. $232,700.
B. $220,600.
C. $147,200.
D. $111,700.
E. $142,700.
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121. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s current ratio for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 2.26.
B. 1.98.
C. 2.95.
D. 3.05.
E. 1.88.
122. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s acid-test ratio for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 2.26.
B. 1.98.
C. 2.95.
D. 3.05.
E. 1.88.
123. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s accounts receivable turnover for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 8.32.
B. 8.62.
C. 8.94.
D. 5.78.
E. 7.90.
124. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s inventory turnover for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 4.72.
B. 4.33.
C. 3.17.
D. 5.78.
E. 3.86.
125. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s days’ sales uncollected for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 43.9.
B. 42.3.
C. 46.2.
D. 80.0.
E. 113.3.
126. Refer to the following selected financial information from Fennie’s, LLC. Compute the
company’s days’ sales in inventory for Year 2.
Year 2 Year 1
Cash $37,500 $32,250
Short-term investments 90,000 60,000
Accounts receivable, net 85,500 79,500
Merchandise inventory 121,000 125,000
Prepaid expenses 12,100 9,700
Plant assets 388,000 338,000
Accounts payable 113,400 107,800
Net sales 711,000 676,000
Cost of goods sold 390,000 375,000
A. 43.9.
B. 42.3.
C. 46.2.
D. 80.0.
E. 113.3.
127. Refer to the following selected financial information from Hansen’s, LLC. Compute the
company’s profit margin for Year 2.
Year 2 Year 1
Net sales $478,500 $426,250
Cost of goods sold 276,300 250,120
Interest expense 9,700 10,700
Net income before tax 67,250 52,680
Net income after tax 46,050 39,900
Total assets 317,100 288,000
Total liabilities 181,400 167,300
Total equity 135,700 120,700
A. 14.1%.
B. 11.7%.
C. 9.6%.
D. 16.7%.
E. 33.9%.
128. Refer to the following selected financial information from Hansen’s, LLC. Compute the
company’s return on total assets for Year 2.
Year 2 Year 1
Net sales $478,500 $426,250
Cost of goods sold 276,300 250,120
Interest expense 9,700 10,700
Net income before tax 67,250 52,680
Net income after tax 46,050 39,900
Total assets 317,100 288,000
Total liabilities 181,400 167,300
Total equity 135,700 120,700
A. 9.6%.
B. 15.2%.
C. 2.6%.
D. 22.2%.
E. 14.5%.
129. Refer to the following selected financial information from Hansen’s, LLC. Compute the
company’s debt-to-equity ratio for Year 2.
Year 2 Year 1
Net sales $478,500 $426,250
Cost of goods sold 276,300 250,120
Interest expense 9,700 10,700
Net income before tax 67,250 52,680
Net income after tax 46,050 39,900
Total assets 317,100 288,000
Total liabilities 181,400 167,300
Total equity 135,700 120,700
A. 1.75.
B. 2.34.
C. 0.75.
D. 1.34.
E. 2.63.
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130. Refer to the following selected financial information from Hansen’s, LLC. Compute the
company’s times interest earned for Year 2.
Year 2 Year 1
Net sales $478,500 $426,250
Cost of goods sold 276,300 250,120
Interest expense 9,700 10,700
Net income before tax 67,250 52,680
Net income after tax 46,050 39,900
Total assets 317,100 288,000
Total liabilities 181,400 167,300
Total equity 135,700 120,700
A. 6.9.
B. 4.8.
C. 5.8.
D. 14.0.
E. 7.9.
131. Match each of the following terms with the appropriate definitions.
A. Comparative financial statement
B. Horizontal analysis
C. Liquidity and efficiency
D. Vertical analysis
E. Financial statement analysis
F. Market prospects
G. Solvency
H. Equity ratio
I. Profitability
J. Common-size financial statement
______ (1) Examination of financial data across time.
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______ (2) The application of analytical tools to general-purpose financial statements and
related data for making business decisions.
______ (3) The availability of resources to meet short-term obligations and to efficiently
generate revenues.
______ (4) A statement with data for two or more successive accounting periods placed in
side-by-side columns, often with changes shown in dollar amounts and percents.
______ (5) A company’s ability to provide financial rewards sufficient to attract and retain
capital.
______ (6)A statement where each amount is expressed as a percent of a base amount to
reveal the relative importance of each financial statement item.
______ (7) The comparison of a company’s financial condition and performance to a base
amount.
______ (8) A company’s ability to generate positive market expectations.
______ (9) A company’s ability to generate future revenues and meet long-term obligations.
______ (10) The portion of total assets provided by equity, computed as total equity divided
by total assets.
132. Match each of the following terms with the appropriate formulas.
A. Days’ sales in inventory
B. Dividend yield
C. Total asset turnover
D. Inventory turnover
E. Return on common stockholders’ equity
F. Gross margin ratio
G. Days’ sales uncollected
H. Profit margin ratio
I. Times interest earned
J. Debt ratio
__________ (1) Net income – preferred dividends
Average common stockholders’ equity
__________(2) Accounts receivable x 365
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Net sales
__________(3) Total liabilities
Total assets
__________ (4) Income before interest expense and income taxes
Interest expense
__________ (5) Annual cash dividends per share
Market price per share
__________ (6) Net sales – Cost of goods sold
Net sales
__________ (7) Cost of goods sold
Average inventory
__________ (8) Net sales
Average total assets
__________(9) Net income
Net sales
__________(10) Ending inventory x 365
Cost of goods sold
133. Identify the financial analysis building block most appropriately associated with each
ratio listed below by placing the letter of the building block a through d beside each ratio 1
through 10. Each building block may be used more than once.
A. Liquidity and Efficiency
B. Solvency
C. Profitability
D. Market Prospects
__________ (1) Equity Ratio
__________ (2) Dividend Yield
__________ (3) Accounts Receivable Turnover
__________ (4) Days’ Sales in Inventory
__________ (5) Return on Total Assets
__________ (6) Price Earnings Ratio
__________ (7) Debt Ratio
__________ (8) Times Interest Earned
__________ (9) Basic Earnings per Share
__________ (10) Inventory Turnover
134. Explain the purpose of financial statement analysis for both external and internal users.
135. Identify and explain the four building blocks of financial statement analysis.
136. What are the standards for comparisons in financial analysis? Give an example of each.
137. Identify and describe three common tools of financial statement analysis.
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138. What is the purpose of a good financial statement analysis report? What are the key
components?
139. Describe the purpose of horizontal financial statement analysis and how it is applied.
140. Describe the purpose of vertical financial statement analysis and how it is applied.
141. Describe ratio analysis including its purpose, application, and interpretation.
Problems
142. A company’s sales in Year 1 were $280,000, and its sales in Year 2 were $341,600.
Using Year 1 as the base year, what is the sales trend percent for Year 2?
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143. Calculate the percent increase or decrease for each of the following financial statement
items:
Year 2 Year 1
Cash $ 37,500 $ 30,000
Accounts receivable 63,000 52,500
Inventory 67,500 90,000
Accounts payable 35,100 27,000
Sales 187,500 150,000
Equipment 165,000 125,000
144. Comparative statements for Kool Corporation are shown below:
Kool Corporation
Comparative Income Statements
For the years ended December 31
2014 2013 2012
Sales $14,800 $13,229
$13,994
Cost of goods sold 8,225 8,661
8,375
Gross profit 6,575 4,568
5,619
Operating expenses 3,664 3,576
3,487
Operating income $ 2,911 $ 992 $
2,132
Calculate trend percentages for all income statement amounts shown and comment on the
results. Use 2012 as the base year. Comment on the results.
145. Calculate the percent increases for each of the following selected balance sheet items.
2014 2013