chapter 15 exercises financial statement analysis

Chapter 15

Exercises

Financial Statement Analysis

In-Class Exercise:

Exercise No. Page E-15-15 931 Horizontal Analysis

In-Class Exercise:

Exercise No. Page E-15-15 931 Horizontal Analysis

(Use the format, as reflected on the next slide, to complete the exercise)

Horizontal AnalysisHorizontal AnalysisHorizontal AnalysisHorizontal Analysis


ExerciseExercise PagePage E15-15 931 Horizontal AnalysisE15-15 931 Horizontal Analysis

ExerciseExercise PagePage E15-15 931 Horizontal AnalysisE15-15 931 Horizontal Analysis

Exercise E15-15:

Data for Mariner Designs, Inc. follow:

2015 2014

Net Sales Revenue……..…………….$431,000 $372,350

Expenses: Cost of Goods Sold.……………… 200,000 187,550 Selling and Admin. Expenses….. 99,000 91,050 Other Expenses…………………… 8,350 6,850 Total Expenses…………………….$307,350 $285,450

Net Income…………………………….$123,650 $ 86,900

Requirements:(1) Prepare a horizontal analysis of the comparative income statement. Round percentage changes to one decimal place.(2) Why did 2015 net income increase by a higher percentage that net sales revenue?

Exercise E15-15:

Data for Mariner Designs, Inc. follow:

2015 2014

Net Sales Revenue……..…………….$431,000 $372,350

Expenses: Cost of Goods Sold.……………… 200,000 187,550 Selling and Admin. Expenses….. 99,000 91,050 Other Expenses…………………… 8,350 6,850 Total Expenses…………………….$307,350 $285,450

Net Income…………………………….$123,650 $ 86,900

Requirements:(1) Prepare a horizontal analysis of the comparative income statement. Round percentage changes to one decimal place.(2) Why did 2015 net income increase by a higher percentage that net sales revenue?



$431,000 - $372,350 = $58,650$431,000 - $372,350 = $58,650$431,000 - $372,350 = $58,650$431,000 - $372,350 = $58,650


$58,650 $58,650 ÷÷ $372,350 = 15.8% $372,350 = 15.8%$58,650 $58,650 ÷÷ $372,350 = 15.8% $372,350 = 15.8%


End of ExerciseEnd of Exercise

In-Class Exercise:

Exercise No. Page E15-16 931 Trend Analysis

In-Class Exercise:

Exercise No. Page E15-16 931 Trend Analysis

Trend AnalysisTrend AnalysisTrend AnalysisTrend Analysis


2012 is the base year.2012 is the base year.2012 is the base year.2012 is the base year.

ExerciseExercise PagePage E15-16 931 Trend Analysis E15-16 931 Trend Analysis

ExerciseExercise PagePage E15-16 931 Trend Analysis E15-16 931 Trend Analysis


Exercise E15-16:

Magic Oaks Realty’s net revenue and net income for the following five-year period, using 2012 as the base year, follows:

Requirements:(1) Compute trend analysis for net revenue and net income. Round to the nearest full percent.(2) Which grew faster during the period, net revenue or net income?

Exercise E15-16:

Magic Oaks Realty’s net revenue and net income for the following five-year period, using 2012 as the base year, follows:

Requirements:(1) Compute trend analysis for net revenue and net income. Round to the nearest full percent.(2) Which grew faster during the period, net revenue or net income?




Divide all revenue items by $1,045,000Divide all revenue items by $1,045,000Divide all revenue items by $1,045,000Divide all revenue items by $1,045,000



$1,045,000 $1,045,000 ÷ ÷ $1,045,000 = 100% $1,045,000 = 100%$1,045,000 $1,045,000 ÷ ÷ $1,045,000 = 100% $1,045,000 = 100%



$1,011,000 $1,011,000 ÷ ÷ $1,045,000 = 97% $1,045,000 = 97%$1,011,000 $1,011,000 ÷ ÷ $1,045,000 = 97% $1,045,000 = 97%



Completed revenue trend analysis.Completed revenue trend analysis.Completed revenue trend analysis.Completed revenue trend analysis.



Divide all income items by $83,000Divide all income items by $83,000Divide all income items by $83,000Divide all income items by $83,000



$83,000 $83,000 ÷ ÷ $83,000 = 100% $83,000 = 100%$83,000 $83,000 ÷ ÷ $83,000 = 100% $83,000 = 100%



$72,000 $72,000 ÷ ÷ $83,000 = 87% $83,000 = 87%$72,000 $72,000 ÷ ÷ $83,000 = 87% $83,000 = 87%



Completed income trend analysis.Completed income trend analysis.Completed income trend analysis.Completed income trend analysis.

In-Class Exercise:

Exercise No. Page E15-17 932 Comparative Balance Sheet

In-Class Exercise:

Exercise No. Page E15-17 932 Comparative Balance Sheet


Vertical AnalysisVertical AnalysisVertical AnalysisVertical Analysis


Express each item as a percent of Total Assets for each yearExpress each item as a percent of Total Assets for each yearExpress each item as a percent of Total Assets for each yearExpress each item as a percent of Total Assets for each year


$42,750 $42,750 ÷÷ $285,000 = 15.0% $285,000 = 15.0%$42,750 $42,750 ÷÷ $285,000 = 15.0% $285,000 = 15.0%


$59,000 $59,000 ÷÷ $309,500 = 19.1% $309,500 = 19.1%$59,000 $59,000 ÷÷ $309,500 = 19.1% $309,500 = 19.1%

Ratio AnalysisRatio AnalysisRatio AnalysisRatio Analysis

In-Class Exercise:

Exercise No. Page E15-20 933 Computing Key Ratios

In-Class Exercise:

Exercise No. Page E15-20 933 Computing Key Ratios

Exercise E15-20Exercise E15-20::

The financial statements of Victor’s Natural Foods include the following items:The financial statements of Victor’s Natural Foods include the following items:

Exercise E15-20Exercise E15-20::

The financial statements of Victor’s Natural Foods include the following items:The financial statements of Victor’s Natural Foods include the following items:

Current Year Preceding YearBalance Sheet:Cash………………………………… $ 15,000 $ 20,000 Short-Term Investments.……….. 11,000 27,000 Accounts Receivable, net………. 54,000 73,000Merchandise Inventory..………… 77,000 69,000 Prepaid Expenses………………... 15,000 9,000 Total Current Assets…………….. $172,000 $198,000Total Current Liabilities.………… $133,000 $ 93,000

Income Statement: Net Credit Sales……………..…… $462,000 Cost of Goods Sold…………..…. 315,000

Current Year Preceding YearBalance Sheet:Cash………………………………… $ 15,000 $ 20,000 Short-Term Investments.……….. 11,000 27,000 Accounts Receivable, net………. 54,000 73,000Merchandise Inventory..………… 77,000 69,000 Prepaid Expenses………………... 15,000 9,000 Total Current Assets…………….. $172,000 $198,000Total Current Liabilities.………… $133,000 $ 93,000

Income Statement: Net Credit Sales……………..…… $462,000 Cost of Goods Sold…………..…. 315,000

Compute the following ratios for the current year: (a) Current ratio (d) Inventory turnover (g) Days’ sales in receivables (b) Cash ratio (e) Days’ sales in inventory (h) Gross profit percentage (c) Acid-test ratio (f) Accounts receivable turnover ratio

Compute the following ratios for the current year: (a) Current ratio (d) Inventory turnover (g) Days’ sales in receivables (b) Cash ratio (e) Days’ sales in inventory (h) Gross profit percentage (c) Acid-test ratio (f) Accounts receivable turnover ratio


Current RatioCurrent RatioCurrent RatioCurrent Ratio

Total Current Assets Total Current Assets .Total Current LiabilitiesTotal Current Liabilities


This ratio measures the short-term debt-paying ability of the company.



Cash + Cash Equivalents Cash + Cash Equivalents .Total Current LiabilitiesTotal Current Liabilities



Cash RatioCash RatioCash RatioCash Ratio

This ratio helps to determine a company’s ability to elps to determine a company’s ability to meet its short-term obligations.meet its short-term obligations.


Acid-Test or Quick RatioAcid-Test or Quick RatioAcid-Test or Quick RatioAcid-Test or Quick Ratio

Quick Assets Quick Assets .Total Current LiabilitiesTotal Current Liabilities


This ratio measures whether a company can pay all its current measures whether a company can pay all its current liabilities if they came due immediately.liabilities if they came due immediately.

This ratio measures whether a company can pay all its current measures whether a company can pay all its current liabilities if they came due immediately.liabilities if they came due immediately.


Quick Assets = Cash + Short-Term Investments + Net Current Quick Assets = Cash + Short-Term Investments + Net Current ReceivablesReceivables

Quick Assets = Cash + Short-Term Investments + Net Current Quick Assets = Cash + Short-Term Investments + Net Current ReceivablesReceivables





Inventory TurnoverInventory TurnoverInventory TurnoverInventory Turnover

Cost of Goods Sold Cost of Goods Sold .Average Mdse InventoryAverage Mdse Inventory


This ratio measures the number of times a company sells its average This ratio measures the number of times a company sells its average level of merchandise inventory during a year.level of merchandise inventory during a year.



Days’ Sales in InventoryDays’ Sales in InventoryDays’ Sales in InventoryDays’ Sales in Inventory

365 365 .Inventory TurnoverInventory Turnover


This ratio measures the average number of days merchandise inventory This ratio measures the average number of days merchandise inventory is held by the company.is held by the company.



Accounts Receivable Turnover RatioAccounts Receivable Turnover RatioAccounts Receivable Turnover RatioAccounts Receivable Turnover Ratio

Net Credit Sales Net Credit Sales .Average Net Accounts Average Net Accounts

ReceivableReceivable



This ratio measures the number of times the company collects the This ratio measures the number of times the company collects the average receivables balance in a year.average receivables balance in a year.



Days’ Sales in ReceivablesDays’ Sales in ReceivablesDays’ Sales in ReceivablesDays’ Sales in Receivables

365 365 .Accounts Receivable TurnoverAccounts Receivable Turnover


This ratio indicates how many days it takes to collect the average This ratio indicates how many days it takes to collect the average level of receivables.level of receivables.


Gross Profit PercentageGross Profit PercentageGross Profit PercentageGross Profit Percentage

Gross Profit Gross Profit . Net Sales Revenue Net Sales Revenue


Measures the profitability of each net sales dollar above the cost of Measures the profitability of each net sales dollar above the cost of goods sold.goods sold.







32%


chapter 15 exercises financial statement analysis

Documents

trend analysis e15

revenue trend analysis

horizontal analysis

compute trend analysis

exercise e15

end of exercise slide

net sales revenue

class exercise