Other Ex

EXERCISE/OTHER
1.
The Cash and Accounts Receivable for a company are provided below:
2008
2007
Cash
$65,000
$50,000
Accounts receivable (net)
$75,200
$80,000
Based on this information, what is the amount and percentage of increase or decrease that would be
shown in a balance sheet with horizontal analysis?
ANS:
Cash
$15,000 increase ($65,000 $50,000), or 30%
Accounts Receivable
$ 4,800 decrease ($80,000 $75,200), or - 6%
DIF:
NAT:
2.
Easy OBJ: 14-01

AACSB Analytic | AICPA FN-Measurement
TOP:
Example Exercise 14-1
The Cash and Accounts Receivable for a company are provided below:
2008
2007
Cash
$64,800
$60,000
Accounts receivable (net)
$46,000
$50,000
Based on this information, what is the amount and percentage of increase or decrease that would be
shown in a balance sheet with horizontal analysis?
ANS:
Cash
$4,800 increase ($64,800 - $60,000), or 8%
Accounts Receivable
$4,000 decrease($46,000 - $50,000), or - 8%
DIF:
NAT:
3.
Easy OBJ: 14-01

TOP:
Income statement information for Sims Company is provided below:

Sales
Cost of goods sold
Gross profit
$120,000
84,000
$ 36,000
Prepare a common sized income statement for Sims Company.

ANS:
Amount
Percentage
Sales
$120,000
100%
($120,000 / $120,000)
Cost of goods sold
$ 84,000
70%
(84,000 / $120,000)
Gross profit
$ 36,000
30%
(36,000 / $120,000)
DIF:
NAT:
Easy OBJ: 14-01

TOP:
529
Chapter 14/Financial Statement Analysis 530
4.
Why would you or why wouldnt you compare an organization like Ford Motor Company to the
local car dealer City Ford/Lincoln/Mercury in vertical and horizontal analysis?
ANS:
Ford Motor Company is an automobile manufacturer with many aspects within the overall company such
as military sales, foundries, credit and financing operations, and its car sales are usually limited to
resellers or large fleet purchasers.
City Ford/Lincoln/Mercury is a local reseller that does not have the diverse operations of the Ford
Motor Company. Most of its sales, which would new and used vehicles, would be to ultimate consumers
and to smaller fleet operations. Major revenues may come from repairs and upgrades of vehicles. Its
credit department may actually be a representative of another organization specializing in automobile
financing.
While they both sell cars and contain the same name elements, they are not comparable.
DIF:
NAT:
Moderate
OBJ: 14-01
AACSB Reflective Thinking | AICPA BB-Critical Thinking
5.
What is a major advantage of using percentages rather than dollar changes in doing horizontal and
vertical analysis?
ANS:
When percentages are utilized rather than dollars, companies that are not the same size can be compared.
If Bowl Full of Grain is a $10 billion per year net sales company and Midwest Cereal Grains is a
$500 million per year net sales company, these two companies can still be compared by using percentages
determined by the analysis. These companies can also be compared to industry standards to determine the
difference between themselves and the generic average.
DIF:
NAT:
6.
Easy OBJ: 14-01

The following items are reported on a companys balance sheet:

Cash
Marketable securities
Accounts receivable
Inventory
Accounts payable
$250,000
100,000
200,000
200,000
300,000
Determine the (a) current ratio, and (b) quick ratio? Round your answer to one digit after the decimal
place.
ANS:
(a)
Current ratio = Current assets (cash, marketable securities, accounts receivable, and
inventory) / current liabilities (accounts payable)
Current ration = ($250,000 + $100,000 + $200,000 + $200,000 / $300,000)
Current ratio = 2.5
(b)
DIF:
NAT:
Quick ratio = 1.8 ($250,000 + $100,000 + $200,000/$300,000)

Easy OBJ: 14-02
TOP:
7.
The following items are reported on a companys balance sheet:

Cash
Accounts receivable
Inventory
Accounts payable
$250,000
100,000
200,000
200,000
250,000
Determine the (a) current ratio, and (b) quick ratio? Round your answer to one digit after the decimal
place.
ANS:
(a)
Current ratio = Current assets (cash, marketable securities, accounts receivable, and
inventory) / current liabilities (accounts payable)
Current ratio = ($250,000 + $100,000 + $200,000 + $200,000 / $250,000)
Current ratio = 3.0
(b)
Quick ratio = 2.2 ($250,000 + $100,000 + $200,000/$250,000)
DIF:
NAT:
8.
Easy OBJ: 14-02

TOP:
A Company reports the following:

Net sales
Average accounts receivable (net)
$720,000
$ 48,000
Determine the (a) accounts receivable turnover, and (b) number of days sales in receivables? Round
your answer to one digit after the decimal place.
ANS:
(a)
Accounts receivable turnover = Sales / Average accounts receivable
Accounts receivable turnover = $720,000 / $48,000
Accounts receivable turnover = 15.0
(b)
Number of days sales in receivable = Average accounts receivable / Average daily

sales
Number of days sales in receivable = $48,000 / (720,000 / 365)
Number of days sales in receivables = 24.3
DIF:
NAT:
Easy OBJ: 14-02

9.
TOP:
A Company reports the following:

Net sales
$900,000
$ 45,000
Determine the (a) accounts receivable turnover, and (b) number of days sales in receivables? Round
your answer to one digit after the decimal place.
ANS:
(a)
Accounts receivable turnover = Sales / Average accounts receivable
Accounts receivable turnover = $900,000 / $45,000
Accounts receivable turnover = 20.0
(b)
Number of days sales in receivable = Average accounts receivable / Average daily

sales
Number of days sales in receivable = $45,000 / (900,000 / 365)
Number of days sales in receivables = 18.3
DIF:
NAT:
Easy OBJ: 14-02

TOP:
10. A company reports the following:

Cost of goods sold
Average inventory
$575,000
$115,000
Determine the (a) inventory turnover, and (b) number of days sales in inventory? Round your
answer to one digit after the decimal place.
ANS:
(a)
Inventory turnover = Cost of good sold / Average inventory
Inventory turnover = $575,000 / $115,000
Inventory turnover = 5.0
(b)
Number of days sales in inventory = Average inventory / Average daily cost of

goods sold
Number of days sales in inventory = $115,000 / ($575,000 / 365)
Number of days sales in inventory = 73 days
DIF:
NAT:
Easy OBJ: 14-02

TOP:
11. The following information was taken from Sloan Companys balance sheet:
Fixed assets (net)
Long-term liabilities
Total liabilities
Total stockholders equity
$1,750,000
$500,000
$375,000
$1,500,000
Determine the companys (a) Ratio of fixed assets to long-term liabilities, and (b) ratio of liabilities
to stockholders equity? Round your answer to one digit after the decimal place.
ANS:
(a)
Ration of fixed assets to long-term liabilities = Fixed assets / Long-term liabilities
Ration of fixed assets to long-term liabilities = $1,750,000 / $500,000
Ration of fixed assets to long-term liabilities = 3.5
(b)
Ratio of liabilities to total stockholders equity = Total liabilities / Total stockholders

equity
Ratio of liabilities to total stockholders equity = $375,000 / $1,500,000
Ratio of liabilities to total stockholders equity = .25
DIF:
NAT:
Easy OBJ: 14-02

TOP:

Income before income tax
Interest expense
$300,000
$150,000
Determine the number of times interest charges are earned. Round your answer to one digit after the
decimal place.
ANS:
Number of times interest charges are earned = (Income before income tax = interest expense) / interest
expense
Number of times interest charges are earned = ($300,000 + $150,000) / $150,000
Number of times interest charges are earned = 3
DIF:
NAT:
Easy OBJ: 14-02

TOP:
13. A company reports the following income statement and balance sheet information for the current
year:
Net income
Interest expense
Average total assets
$ 150,000
$ 25,000
$2,000,000
Determine the rate earned on total assets. Round your answer to one digit after the decimal place.
ANS:
Rate earned on total assets = (Net income + interest expense) / Average total assets
Rate earned on total assets = ($150,000 + $25,000) / $2,000,000
Rate earned on total assets = ($175,000 / $2,000,000
Rate earned on total assets = 8.8%
DIF:
NAT:
Easy OBJ: 14-03

TOP:

Net income
Preferred dividends
Average stockholders equity
Average common stockholders equity
$150,000
$10,000
$1,000,000
$800,000
Determine the (a) rate earned on stockholders equity, and (b) rate earned on common stockholders
equity? Round your answer to one digit after the decimal place.
ANS:
(a)
Rate earned on stockholders equity = Net income / Average stockholders equity
Rate earned on stockholders equity = $150,000 / $1,000,000
Rate earned on stockholders equity = 15.0%
(b)
Rate earned on common stockholders equity = (Net income - preferred dividends) /

Rate earned on common stockholders equity = ($150,000 - $10,000) / $800,000
Rate earned on common stockholders equity = 1.75%
DIF:
NAT:
Moderate
OBJ: 14-03
TOP:

Net income
Preferred dividends
Shares of common stock outstanding
Market price per share of common stock
$240,000
$ 10,000
20,000
$35.00
Determine the companys earnings per share on common stock.

ANS:
Earnings per share on common stock = (Net income - preferred dividends) / shares of
common stock outstanding.
Earnings per share = ($240,000 - $10,000) / 20,000
Earnings per share = $11.50
DIF:
NAT:
Easy OBJ: 14-03

TOP:

Net income
Preferred dividends
Market price per share of common stock
$240,000
$ 10,000
20,000
$35.00
Determine the companys price-earnings ratio. Round your answer to one digit after the decimal
place.
ANS:
Price-earnings ratio = Market price per share of common stock / Earnings per share on common stock
Earnings per share on common stock = (Net income - preferred dividends) / shares of common stock
outstanding.
Earnings per share = ($240,000 - $10,000) / 20,000
Earnings per share = $11.50
Price-earnings ratio = $35.00 / $11.50
Price-earnings ratio = 3.0
DIF:
NAT:
Easy OBJ: 14-03

TOP:

Net sales
$2,700,000
$1,500,000
Determine the ratio of net sales to total assets. Round your answer to one digit after the decimal
place.
ANS:
Ratio of net sales to total assets = Net sales / Average total assets
Ratio of net sales to total assets = $2,700,000 / 1,500,000
Ratio of net sales to total assets = 1.8
DIF:
NAT:
Easy OBJ: 14-03

TOP:

Net sales
$2,660,000
$1,400,000
Determine the ratio of net sales to total assets. Round your answer to one digit after the decimal
place.
ANS:
Ratio of net sales to total assets = Net sales / Average total assets
Ratio of net sales to total assets = $2,660,000 / 1,400,000
Ratio of net sales to total assets = 1.9
DIF:
NAT:
Easy OBJ: 14-03

TOP:
19. Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as companies to each
other?
ANS:
Coca-Cola has maintained its focus on the beverage market with little distraction. Pepsi-Cola (PepsiCo)
has diversified into the fast food market as well as beverages with such operations as Taco Bell, KFC, and
Pizza Hut. While their carbonated soft drinks may be comparable, the direct comparison of the two
companies is limited by their differences.
DIF:
NAT:
Moderate
OBJ: 14-03
AACSB Reflective Thinking | AICPA BB-Critical Thinking
PROBLEM
1.
Comparative information taken from the Aster Company financial statements is shown below:
2008__
2007__
(a) Notes receivable
$ 10,000
$
-0(b) Accounts receivable
172,000
140,000
(c) Retained earnings
30,000
(40,000)
(d) Sales
830,000
750,000
(e) Operating expenses
170,000
200,000
(f) Income taxes payable
25,000
20,000
Instructions
Using horizontal analysis, show the percentage change from 2007 to 2008 with 2007 as the base
year.
ANS:
(a) Base year is zero. Not possible to compute.
(b) $32,000 $140,000 = 23% increase
(c) Base year is negative. Not possible to compute.
(d) $80,000 $750,000 = 11% increase
(e) $30,000 $200,000 = 15% decrease
(f) $5,000 $20,000 = 25% increase
DIF:
NAT:
2.
Moderate
OBJ: 14-01
The following items were taken from the financial statements of Saintley, Inc., over a three-year
period:
Item
Net Sales
Cost of Goods Sold
Gross Profit
2008
$355,000
214,000
$141,000
2007
$336,000
206,000
$130,000
Compute the following for each of the above time periods.

(a)
The amount and percentage change from 2007 to 2008.
(b)
The amount and percentage change from 2006 to 2007.
2006
$300,000
186,000
$114,000
ANS:
Item
Net Sales
Cost of Goods Sold
DIF:
NAT:
3.
2008
$
19,000
8,000
1,000
2007
Percent
5.6
3.9
0.8
$
36,000
20,000
16,000
Percent
12.0
10.8
14.0
Moderate
OBJ: 14-01
The comparative balance sheet of Drango Company appears below:

HUERTO COMPANY
Comparative Balance Sheet
December 31, 2007
Assets
Current assets
Plant assets
Total assets
2007
$ 340
675
$1,015
2006
$280
520
$800
Liabilities and stockholders' equity

Current liabilities
Long-term debt
Common stock
Retained earnings
Total liabilities and stockholders' equity
$ 180
250
325
260
$1,015
$120
160
320
200
$800
Instructions
(a)
Using horizontal analysis, show the percentage change for each balance sheet item
using 2006 as a base year.
(b)
Using vertical analysis, prepare a common size comparative balance sheet.
ANS:
HUERTO COMPANY
December 31, 2007
2007
(b)
Percentage
Assets
Amount
Current assets
$ 340
Plant assets
675
Total assets
$1,015
Liabilities and stockholders' equity
Current liabilities
$ 180
Long-term debt
250
Common stock
325
Retained earnings
260
Total liabilities and
stockholders' equity
$1,015
DIF:
NAT:
4.
2006
(b)
(a)
Percent
33%
67
100%
Amount
$280
520
$800
Percent
35%
65
100%
Change
21%
30%
27%
18%
25
32
25
$120
160
320
200
15%
20
40
25
50%
56%
2%
30%
100%
$800
100%
27%
Moderate
OBJ: 14-01
Condensed data taken from the ledger of Jefferson Company at December 31, 2006 and 2005, are as
follows:
Current assets
Property, plant, and equipment
Intangible assets
Current liabilities
Common stock
Retained earnings
2006
$150,000
450,000
20,700
70,000
200,000
225,000
125,700
2005
$130,000
400,000
30,000
80,000
250,000
150,000
80,000
Prepare a comparative balance sheet, with horizontal analysis, for December 31, 2006 and 2005.
(Round percents to one decimal point.)
ANS:
Jefferson Company
December 31, 2006 and 2005
Assets
Current assets
Intangible assets
Total assets
Liabilities
Current liabilities
Total liabilities
Stockholders' Equity
Common stock
Retained earnings
Total stockholders' equity
DIF:
NAT:
5.
Increase (Decrease)
Amount
Percent
2006
2005
$150,000
450,000
20,700
$620,700
$130,000
400,000
30,000
$560,000
$ 20,000
50,000
(9,300)
$ 60,700
15.4%
12.5%
(31.0%)
10.8%
$ 70,000
200,000
$270,000
$ 80,000
250,000
$330,000
$ (10,000)
(50,000)
$(60,000)
(12.5%)
(20.0%)
(18.2%)
$225,000
125,700
$350,700
$150,000
80,000
$230,000
$ 75,000
45,700
$120,700
50.0%
57.1%
52.5%
$620,700
$560,000
$ 60,700
10.8%
Moderate
OBJ: 14-02
Revenue and expense data for Malden Company are as follows:

Administrative expenses
Cost of goods sold
Income tax
Net sales
Selling expenses
(a)
(b)
2006
$ 37,000
400,000
40,000
900,000
190,000
2005
$ 20,000
320,000
32,000
700,000
110,000
Prepare a comparative income statement, with vertical analysis, stating each item for both
2006 and 2005 as a percent of sales.
Comment upon significant changes disclosed by the comparative income statement.
ANS:
(a)
Malden Company
Comparative Income Statement
For Years Ended December 31, 2006 and 2005
Net sales
Cost of goods sold
Gross profit
Selling expenses
Administrative expenses
Total operating expenses
Income before income tax
Income tax
Net income
(b)
Percent
100.0%
44.4
55.6%
21.1%
4.1
25.2%
30.3%
4.4
25.9%
2005
Amount
$700,000
320,000
$380,000
$110,000
20,000
$130,000
$250,000
32,000
$218,000
Percent
100.0%
45.7
54.3%
15.7%
2.9
18.6%
35.7%
4.6
31.1%
There was a 1.3% decrease in the cost of goods sold, and a 1.4% increase in administrative
expenses. However, the more significant increase of 5.4% in selling expenses offset the
1.3% decrease in cost of goods sold and contributed greatly to the 5.2% decrease in net
income.
DIF:
NAT:
6.
2006
Amount
$900,000
400,000
$500,000
$190,000
37,000
$227,000
$273,000
40,000
$233,000
Moderate
OBJ: 14-02
The following data are taken from the balance sheet at the end of the current year. Determine the (a)
working capital, (b) current ratio, and (c) acid-test ratio. Present figures used in your computations.
Round ratios to the nearest tenth.
Accounts payable
Accounts receivable
Accrued liabilities
Cash
Income tax payable
Inventory
Notes payable, short-term
Prepaid expenses
ANS:
(a) Current assets ($595,000) - current liabilities ($244,000) = $351,000
(b) Current assets ($595,000) / current liabilities ($244,000) = 2.4
(c) Cash + marketable securities + accounts receivable ($440,000) / current liabilities
($244,000) = 1.8
DIF:
NAT:
Easy OBJ: 14-02

$145,000
110,000
4,000
80,000
10,000
140,000
250,000
85,000
15,000
7.
The following data are taken from the financial statements:
Net sales
Cost of goods sold
Average monthly inventory
Inventory, end of year
(a)
(b)
Current
Year
$3,600,000
2,000,000
332,000
372,000
Preceding
Year
$4,000,000
2,700,000
328,000
347,000
Determine for each year (1) the inventory turnover and (2) the number of days' sales in
inventory.
Comment on the favorable and unfavorable trends revealed by the data.
ANS:
(a)
(1)
Cost of goods sold/average monthly

inventory
End-of-year inventory/average daily cost
of goods sold*
*Average daily cost of good sold
(COGS 365 days)
(2)
(b)
Preceding
Year
6.0
8.2
67.90
46.91
$5,479
$7,397
Net sales decreased while gross profit increased. The cost of goods sold as a percentage of
sales decreased from 68% to 56%. The inventory turnover declined and the number of days'
sales in inventory increased, which are unfavorable trends.
DIF:
NAT:
8.
Current
Year
Easy OBJ: 14-02

The following data are taken from the financial statements:

Accounts receivable (net), end of year
Net sales on account
(a)
(b)
Current
Year
$123,000
129,012
950,000
Preceding
Year
$ 95,000
87,516
825,000
Assuming that credit terms on all sales are n/45, determine for each year (1) the accounts
receivable turnover and (2) the number of days' sales in receivables.
Comment on any significant trends revealed by the data.
ANS:
(a)
(1)
(2)
(b)
Net sales on account/average

accounts receivable (net)
Accounts receivable, end of year/
average daily sales on account
Current
Year
Preceding
Year
7.72
8.68
49.56
38.72
Although net sales increased during the current year, a favorable trend, several unfavorable
trends are disclosed by the analysis. The accounts receivable turnover has declined from
8.68 in the preceding year to 7.72 in the current year. Based on credit terms of n/45, a
turnover of less than 8 indicates that some receivables are not being collected within the
45-day period. Likewise, the number of days' sales in receivables indicates an unfavorable
trend, increasing from 38.72 at the end of the preceding year to 49.56 at the end of the
current year.
DIF: Easy OBJ: 14-02

NAT: AACSB Analytic | AICPA FN-Measurement
9. From the following data, determine for the current year the (a) rate earned on total assets, (b) rate
earned on stockholders' equity, (c) rate earned on common stockholders' equity, (d) earnings per
share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on
common stock. Assume that the current market price per share of common stock is $27. (Present key
figures used in your computations.)
Current
Preceding
Year
Year
Current assets
$ 735,000
$ 820,000
1,500,000
1,400,000
Current liabilities
(non-interest-bearing)
150,000
140,000
Long-term liabilities, 12%
400,000
400,000
Preferred 10% stock
250,000
250,000
Common stock, $25 par
1,200,000
1,200,000
Retained earnings:
Beginning of year
230,000
160,000
Net income for year
85,000
155,000
Preferred dividends declared
(25,000)
(25,000)
Common dividends declared
(60,000)
(60,000)
ANS:
(a)
Net income ($ 85,000) + Interest expense ($48,000)
-----------------------------------------------------------($2,235,000 + $2,220,000)
---------------------------2
= 6.0%
(b)
Net income ($ 85,000)
---------------------------------------------------------------------($1,680,000 + $1,680,000)
Average stockholders' equity
--------------------------------2
= 5.1%
(c)
Net income ($85,000) - preferred dividends ($25,000)
-------------------------------------------------------------= 4.2%
Average common
($1,430,000 + $1,430,000)
------------------------------2
(d)
Net income ($85,000) - preferred dividends ($25,000)
------------------------------------------------------Shares of common stock outstanding (48,000)
= $1.25
Market price per share of common stock ($27)

-------------------------------------------------------Earnings per share of common stock ($1.25)
= 21.6
(e)
(f)
Dividends per share of common stock ($1.25)
------------------------------------------------------Market price per share of common stock ($27)
DIF:
NAT:
= 4.6%
Moderate
OBJ: 14-03
10. The following information has been condensed from the December 31 balance sheets of Henry Co.:
Assets:
Current assets
Fixed assets (net)
Total assets
Liabilities:
Current liabilities
Total liabilities
Stockholders' equity
2006
2005
$ 825,500
1,473,600
$2,299,100
$ 674,300
1,275,300
$1,949,600
$ 313,500
703,000
$1,016,500
$1,282,600
$ 309,600
545,000
$ 854,600
$1,095,000
$2,299,100
$1,949,600
(a)
(b)
(c)
Determine the ratio of fixed assets to long-term liabilities for 2006 and 2005.
Determine the ratio of liabilities to stockholders' equity for 2006 and 2005.
Comment on the year-to-year changes for both ratios.
ANS:
(a)
Ratio of fixed assets to
long-term liabilities
2006
2005
2.10
2.34
.79
.78
(b)
Ratio of liabilities to
(c)
There are fewer fixed assets on a proportionate basis to protect the interests of the longterm creditors. The interests of all the creditors in the total assets of the company, however,
are rising slightly from year-to-year when compared to the shareholders' equity in those
same assets.
DIF:
NAT:
Moderate
OBJ: 14-03

Net income
Preferred dividends
Average stockholders equity
$125,000
$5,000
$1,000,000
$700,000
Determine the (a) rate earned on stockholders equity, and (b) rate earned on common stockholders
equity? Round your answer to one digit after the decimal place.
ANS:
(a)
Rate earned on stockholders equity = Net income / Average stockholders equity
Rate earned on stockholders equity = $125,000 / $1,000,000
Rate earned on stockholders equity = 12.5%
(b)
Rate earned on common stockholders equity = (Net income - preferred dividends) /
Rate earned on common stockholders equity = ($125,000 - $5,000) / $700,000
Rate earned on common stockholders equity = 17.1%
DIF:
NAT:
Moderate
OBJ: 14-03
12. Selected data from the Conner Company are presented below:
Total assets
Average assets
Net income
Net sales
Average common stockholders' equity
Net cash provided by operating activities
$1,500,000
1,700,000
250,000
1,400,000
1,000,000
275,000
10,000
Instructions
Calculate the profitability ratios that can be computed from the above information.
ANS:
With the information provided, the profitability ratios that can be calculated are as follows:
1.
Ratio of net sales to assets
=
=
=
Net sales Average total assets

$1,400,000 $1,500,000
93.3%
2.
Rate earned on total assets
=
=
=
Net income +Interest expense Average assets

$250,000 + 0 $1,700,000
14.7%
3.
Rate earned on common

4.
Earnings per share on

common stock
DIF:
NAT:
=
=
$250,000 - 0 $1,000,000
25%
=
=
$250,000 10,000
$25 per share
Moderate
OBJ: 14-03

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EXERCISE/OTHER

Easy OBJ: 14-01

Example Exercise 14-1

Easy OBJ: 14-01

Example Exercise 14-1

Income statement information for Sims Company is provided below:

Prepare a common sized income statement for Sims Company.

Easy OBJ: 14-01

Example Exercise 14-2

Chapter 14/Financial Statement Analysis 530

Easy OBJ: 14-01

The following items are reported on a companys balance sheet:

Quick ratio = 1.8 ($250,000 + $100,000 + $200,000/$300,000)

Example Exercise 14-2

Chapter 14/Financial Statement Analysis 531

The following items are reported on a companys balance sheet:

Quick ratio = 2.2 ($250,000 + $100,000 + $200,000/$250,000)

Easy OBJ: 14-02

Example Exercise 14-3

A Company reports the following:

Number of days sales in receivable = Average accounts receivable / Average daily

Easy OBJ: 14-02

Example Exercise 14-4

A Company reports the following:

Chapter 14/Financial Statement Analysis 532

Number of days sales in receivable = Average accounts receivable / Average daily

Easy OBJ: 14-02

Example Exercise 14-4

10. A company reports the following:

Number of days sales in inventory = Average inventory / Average daily cost of

Easy OBJ: 14-02

Example Exercise 14-5

Chapter 14/Financial Statement Analysis 533

Ratio of liabilities to total stockholders equity = Total liabilities / Total stockholders

Easy OBJ: 14-02

Example Exercise 14-6

12. A company reports the following:

Easy OBJ: 14-02

Example Exercise 14-7

Easy OBJ: 14-03

Example Exercise 14-9

Chapter 14/Financial Statement Analysis 534

14. A company reports the following:

Rate earned on common stockholders equity = (Net income - preferred dividends) /

Example Exercise 14-10

15. A company reports the following:

Determine the companys earnings per share on common stock.

Easy OBJ: 14-03

Example Exercise 14-11

16. A company reports the following:

Chapter 14/Financial Statement Analysis 535

Easy OBJ: 14-03

Example Exercise 14-11

17. A company reports the following:

Easy OBJ: 14-03

Example Exercise 14-8

18. A company reports the following:

Easy OBJ: 14-03

Example Exercise 14-8