Net income preferred dividends average stockholders equity

Financial Statement Analysis, Managerial Accounting Concepts And Principles,

Chapter 17 Financial Statement Analysis

Learning Example Objectives Exercises OB"f

" : EE 17-3 r: /.: : PE 17-38 Current position analysis

The following items are reported on a company,s balance sheet Cash

Temporary investments Accounts receivable (net)

lnventory

S2so,ooo

180,000

220,O00

200,000

OBJ.3 EE17-4 r: r)

0BJ.2 EE17-4 t, t

OBJ,2 EE 17-s ,., t ,.,

Accounts payable 500,000 Determine (a) the current ratio and (b) the quick ratio. Round to one decimal place.

PE 17-4A Accounts receivable analysis A company repofis the following:

Net sales

Average accounts receivable (net) .l00,000 Determine (a) the accounts receivable turnover and (b) the number of days, sales in re_ceivables. Round to one decimal place.

PE 17-48 Ac(ounts receivable analysis A company reports the following:

Net sales s700,000 Average accounts receivable (net) 50,OOO

Determine (a) the accounts receivable turnover and (b) the number of days, sales in re_ceivables. Round to one decimal place.

s r,600,000

PE 17-5A lnventory analysis A company reports the following:

Cost of goods sold Average inventory

Determine (a) the inventory turnover and (b) the Round to one decimal place.

s880,000 1 10,000

nurnber of days, sales in inventory.

OBJ.2 EE17-S t 7 PE 17-5B lnventory analysis A company repofts the following:

Cost of goods sold Average inventory

Determine (a) the inventory turnover and (b) the Round to one decimal place.

.- =-\

s360,000 50,000

number of days, sales in inventory.

OBJ. A EE 17-6 r, / - PE 17-5A solvency analysis g infonnation was taken from Wheat Company,s balance sheet:

Fixed assets (net)

Long-term liabilities Iotal liabilities

s836,000 380,000

550,000 Total stockholders,equity 500,000

Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio ofliabilities to stockholders, equity.

Chapter 17 Financial Statement Analysis 807

Learning Exomple Objectives Exercises OBJ,3 EE 17-10 r,

oBJ.3 EE 17-10

OBJ.3 EE17-11 r

PE 17-1oA Common stockholders' profitability analysis A company reports the following:

Net income Preferred dividends Average stockholders' equity Average common stockholders' equity

s 210,000 30,000

1,750,000

1,000,000

Determine (a) the rate earned on stockholders' equity and (b) the rate earned on common stockholders' equity. Round to one decimal place.

PE 17-10B Common stockholders' profitability analysis A company reports the following:

Determine (a) the rate earned on stockholders' equity and (b) the rate earned on common stockholders' equity. Round to one decimal place.

Net income Preferred dividends Average stockholders' equity Average common stockholders' equity

Net income Preferred dividends Shares of common stock outstanding Market price per share of common stock

the company's earnings per share on the company's price-earnings ratio.

s 600,000 50,000

6,000,000

5,000,000

s440,000

s40,000 50,000

51 00

common stock.a. Determine b. Determine

PE 17-114 ings per share and price-earnings reports the following:

oBJ.3 EErT-11, PE 17-1 1B Earnings per share and price-earnings A company reports the following:

Net income Preferred dividends Shares of common stock outstanding Market price per share of common stock

a. Determine the company's earnings per share on b. Determine the company's price-earnings ratio.

56s0,000

ss0,000 120,000

57s

common stock.

OBJ. l y' a.2012 net income: $4,000;0.5o/o of sales

EX 17-1 Vertical analysis of income statement Revenue and expense data for Mandell Technologies Co.

2012

Sales

Cost of goods sold

Selling expenses

Administrative expenses Income tax expense

are as follows:

2011

5800,000 504,000

120,000

128,000

33,600

s740,000 407,000 '140,600

12s,800

48,1 00

Chapter 17 Financial Statement Analysis 815 -illl ex, 17-22 Price-earnings ratio; dividend yield

The table below shows the stock price, earnings per share,

three comPanies as of MaY 2010: and dividends Per share for

Earnings Share

493.14

52.67

5 1.s7 21.99

3.04

:. Earnings Per :'e on common ::. 5i I.BG

Appendix EX17-23 Earnings per share, extraordinary item

The net income reported on the income statement of styx co' was $3,200,000' There

were 250,000 shares of $5 par common stock and 250,000 shares of $1 preferred stock

outstanding throughout th" ir..".t year. The income statement included two extraordinary itemsl a $]00,000 gain ttom condemnation of land and a $350,000

loss arising from flood

damage, both aftel applicable income tax. Detetmine the per-shate tigutes tor CommOn

stock for (a) income betole extraordinafy items and (b) net inconre.

a. Determine the price-earnings ratio and dividend yield for the three companies' Round

to one decimal Place. s,.*Explainthedifferencesintheseratiosacrossthethreecompanies.

s800,000

5 r00,000x

s 1 20,000"

50,000

4oo/o

Appendix EX 17-24 Extraordinary item Assume that the amount of each of the following items is material to the financial state- ments. Classify each item as either normally recurring (NR) or extraordinary (E).

a. Gain on sale of land condemned by the local government for a public works project. b. Uninsured flood loss. (Flood insurance is unavailable because of periodic flooding in

the area.) c. Loss on the disposal of equipment considered to be obsolete because of the develop-

ment of new technology. d. Uncollectible accounts expense. e. Loss on sale of investments in stocks and bonds. f. Uninsured loss on building due to hurricane damage. The building was purchased by

the company in 1!10 and had not previously incurred hurricane damage. g. Interest revenue on notes receivable.

,.-. / nppendix / I eX 1:.-zs /nro-.statement and earnings per share for extraordinary items and discon- kfirefoperations

Eris, Inc., repofis the following for 201.2:

lncome from continuing operations before income tax

Extraordinary property loss from hurricane

Loss from discontinued operatlons

Weighted average number of shares outstanding

Applicable tax rate *Net of any tax effect.

a. Prepare a paftial income statement for Eris, Inc., beginning with income from continu- ing operations before income tax.

b. Calculate the earnings per common share for Eris, Inc., including per-share amounts for unusual items.

Dividends Price Share