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    Financial Statement Analysis Practice

    Uploaded by

    Rain Lerog
    This document provides definitions and calculations for various financial ratios used to analyze a company's liquidity, asset management, debt management, profitability, and market value including current ratio, quick ratio, inventory turnover ratio, days sales outstanding, total debt to total assets ratio, and price-earnings ratio. It also includes examples of calculating financial ratios using sample company balance sheets and income statements.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd

    Financial Statement Analysis Practice

    Uploaded by

    Rain Lerog
    68 views12 pages
    This document provides definitions and calculations for various financial ratios used to analyze a company's liquidity, asset management, debt management, profitability, and market value including current ratio, quick ratio, inventory turnover ratio, days sales outstanding, total debt to total assets ratio, and price-earnings ratio. It also includes examples of calculating financial ratios using sample company balance sheets and income statements.

    Original Title

    FINANCIAL-STATEMENT-ANALYSIS-PRACTICE

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    This document provides definitions and calculations for various financial ratios used to analyze a company's liquidity, asset management, debt management, profitability, and market value including current ratio, quick ratio, inventory turnover ratio, days sales outstanding, total debt to total assets ratio, and price-earnings ratio. It also includes examples of calculating financial ratios using sample company balance sheets and income statements.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    68 views12 pages

    Financial Statement Analysis Practice

    Uploaded by

    Rain Lerog
    This document provides definitions and calculations for various financial ratios used to analyze a company's liquidity, asset management, debt management, profitability, and market value including current ratio, quick ratio, inventory turnover ratio, days sales outstanding, total debt to total assets ratio, and price-earnings ratio. It also includes examples of calculating financial ratios using sample company balance sheets and income statements.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 12

    FINANCIAL STATEMENT

    ANALYSIS
    Liquidity Ratios

    •Current Ratio

    •Quick, or Acid Test, Ratio


    Asset Management Ratios
    • Inventory Turnover Ratio

    • Days Sales Outstanding

    • Fixed Assets Turnover Ratio

    • Total Assets Turnover Ratio


    Debt Management Ratios

    •Total Debt to Total Assets

    •Times-Interest-Earned Ratio
    Profitability Ratios
    • Operating Margin
    • Profit Margin
    • Return on Total Assets
    • Basic Earning Power (BEP) Ratio
    • Return on Common Equity
    Market Value Ratios

    •Price/Earnings Ratio

    •Market/Book Ratio
    Charles Corporation’s balance sheet at December 31,20X7, shows the
    following:
    Current assets
    Cash P 4,000
    Marketable securities 8,000
    Accounts receivable 100,000 Determine the
    Inventories 120,000
    following:
    Prepaid expenses 1,000
    Total current assets P233,000
    (a) net working capital;
    (b) current ratio;
    Current liabilities (c) quick ratio.
    Notes payable P 5,000
    Accounts payable 150,OOO
    Accrued expenses 20,000
    Income taxes payable 1,000
    Total current liabilities P176,000
    Accounts receivable P200,000
    Accounts payable 80,000
    Bonds payable, due in 10 years 500,000
    Cash 100,000
    Interest payable, due in three months 25,000
    Inventory 440,000
    Land 800,000
    Notes payable, due in six months 250,000
    What will happen to the ratios below if Ratio Company uses cash to pay 50
    percent of its accounts payable?
    A. B. C. D.
    Current ratio Increase Decrease Increase Decrease
    Acid-test ratio Increase Decrease Decrease Increase
    Utica Company’s net accounts receivable were
    P250,000 as of December 31,20X8, and
    P300,000 as of December 31, 20x9.

    Net cash sales for 20x9 were P1OO,OOO. The


    accounts receivable turnover for 20x9 was 5.0.
    What were Utica’s total net sales for 20X9?
    Industry A has three companies whose income statements and
    balance sheets are summarized below.

    Company X Company Y Company Z


    Sales P500,000 (d) (g)
    Net income P25,000 P30,000 (h)
    Total assets P100,000 (e) P250,000
    Total asset turnover (a) (f) 0.4
    Profit margin (b) 0.4% 5%
    Return on total assets (c) 2% (i)
    The Board of Directors is dissatisfied with last
    year's ROE of 15%. If the profit margin and asset
    turnover remain unchanged at 8% and 1.25
    respectively, by how much must the total debt
    ratio increase to achieve 20% ROE? Answer is in
    percentage form.
    The following ratios have been computed for Los Alamitos
    Company and are compared with the industry averages:

    Los AIamitos Industry


    Return on total assets (ROA) 6.2% 6.0%
    Return on common equity (ROE) 16.5% 8.5%

    Comment on the comparison of the company to the


    industry.

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