Ratios 1
Net sales divided by Average accounts receivable, net is the:
Accounts receivable turnover ratio.
The ability to meet short-term obligations and to efficiently generate revenues is called:
Activities that involve the production or purchase of merchandise and the sale of goods and services to customers, including expenditures related to administering the business, and the payment of wages are classified as:
Operating Activities
Stormy Company reports the following amounts on its statement of cash flow: Net cash provided by operating activities was $33,000; net cash used in investing activities was $12,000 and net cash used in financing activities was $15,000. If the beginning cash balance is $6,000, what is the ending cash balance?
$12,000
($6,000 + $33,000 - $12,000 - $15,000)
The statement of cash flows helps analysts evaluate all but which of the following?
a. Source of cash used to finance investing activities.
b. Source of cash used for debt repayments.
c. Differences between net income and net operating cash flow.
d. Ability of the company to generate profit.
e. Source of cash used for plant expansion.
d. Ability of the company to generate profit.
Cooper Company's most recent balance sheet reported total assets of $1.76 million, total liabilities of $0.87 million, and total equity of $0.89 million. Its Debt to equity ratio is:
0.98
liabilities/equity
.87/.89
Felicia Corporation reported Net sales of $785,000 and Net income of $122,000. The Profit margin is:
15.54%
Net Sales/Net Income
($122,000/$785,000)x100
The appropriate section in the statement of cash flows for reporting the purchase of equipment for cash is:
Investing Activities
In preparing a company's statement of cash flows for the most recent year using the indirect method, the following information is available
Net income for the year was $ 66,000
Accounts payable increased by 19,400
Accounts receivable decreased by 26,400
Inventories increased by 7,800
Depreciation expense was 34,200
Net cash provided by operating activities was:
$138,200
($66,000 + $19,400 + $26,400 - $7,800 + $34,200)
The statement of cash flows reports all but which of the following:
a. The financial position of the company at the end of the accounting period..
b. Cash flow from Financing Activities
c. Significant noncash financing and investing activities
d. Cash flow from Investing Activities
e. Cash flow from Operating Activities
a. The financial position of the company at the end of the accounting period..
3. Refer to the following selected financial information from Smith, LLC. Compute the company's current ratio for Year 2.
Year 2 Year 1
Cash $ 39,100 $ 33,850
Short-term investments 106,000 68,000
Accounts receivable, net 93,500 87,500
Merchandise inventory 129,000 133,000
Prepaid expenses 13,700 11,300
Plant assets 396,000 346,000
Accounts payable 105,400 115,800
Net sales 719,000 684,000
Cost of goods sold 398,000 383,000
3.62
current assets/current liabilities
($39,100+$106,000+$93,500+$129,000+$13,700)/$105,400
A company reports basic earnings per share of $5.50, cash dividends per share of $2.25, and a market price per share of $65.75. The company's dividend yield equals:
3.42%
Annual Dividend/Current Market Price
($2.25/$65.75)x100
Cash flows from interest received on loans are reported in the statement of cash flows as part of:
Operating activities.
In preparing a company's statement of cash flows for the most recent year, the following information is available:
Loss on the sale of equipment $ 15,900
Purchase of equipment 164,000
Proceeds from the sale of equipment 145,000
Repayment of outstanding bonds 96,500
Purchase of treasury stock 71,500
Issuance of common stock 105,500
Purchase of land 134,000
Increase in accounts receivable during the year 52,500
Decrease in accounts payable during the year 84,500
Payment of cash dividends 44,500
Net cash flows from investing activities for the year were:
$153,000 of net cash used.
(-$164,000 equip purchase + $145,000 equip sale - $134,000 land purchase = -$153,000)
negative = cash used
The statement of cash flows reports:
Cash inflows and cash outflows for an accounting period.
Refer to the following selected financial information from Smith, LLC. Compute the company's days' sales uncollected for Year 2. (Use 365 days a year.)
Year 2 Year 1
Cash $38,400 $33,150
Short-term investments 99,000 64,500
Accounts receivable, net 90,000 84,000
Merchandise inventory 125,500 129,500
Prepaid expenses 13,000 10,600
Plant assets 392,500 342,500
Accounts payable 108,900 112,300
Net sales 715,500 680,500
Cost of goods sold 394,500 379,500
45.92
(accounts receivable/net sales) x 365 days
($90,000 / $715,500) x 365
A corporation reports the following year-end balance sheet data. The company's acid-test ratio equals:
Cash $ 49,000
Current liabilities $ 84,000
Accounts receivable 64,000
Long-term liabilities 20,000
Inventory 69,000
Common stock 109,000
Equipment 154,000
Retained earnings 123,000
Total assets $ 336,000
Total liabilities and equity $ 336,000
1.35
(current quick assets)/current liabilities
($49,000+$64,000)/$84,000
The appropriate section in the statement of cash flows for reporting the issuance of common stock for cash is:
Financing Activities
Ocean Company’s net income for the year ended December 31, Year 2 was $195,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash paid for dividends during Year 2
At December 31 Year 2 Year 1
Common Stock, $5 par value $510,000 $459,000
Paid-in capital in excess of par 958,000 862,000
Retained earnings 698,000 591,000
$88,000
(Year 2 RE $698,000- Year 1 RE $591,000 = $107,000. - Net Income $195,000 = -$88,000)
negative means paid out in dividends
Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as ____________. In particular, the ones in which each individual financial statement amount is expressed as a percentage of a base amount are called _____________.
Comparative Statements; Common-size comparative statements.
Johnson Company reported Net sales of $1,290,000 and average Accounts Receivable, net of $69,500. The accounts receivable turnover ratio is:
18.6 times
Net Sales/Avg Accounts receivable
$1,290,000/$69,500
Use the following selected information from Chevy, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.
2017 2016
Net sales $ 538,600 $ 436,200
Cost of goods sold 223,900 135,830
Operating expenses 81,640 78,680
Net earnings 41,260 29,260
41.6% for 2017 and 31.1% for 2016.
COGS/Net Sales
2017: ($223,900/$538,600)x100
2016: ($135,830/$436,200)x100
The appropriate section in the statement of cash flows for reporting the purchase of land in exchange for common stock is:
Schedule of noncash investing or financing activity.
A machine with a cost of $164,000, current year depreciation expense of $25,500 and accumulated depreciation of $102,000 is sold for $53,600 cash. The total amount related to this machine that should be reported in the operating section of the statement of cash flows under the indirect method is:
$33,900
(Calculate current book value: $164,000 - $102,000 accum depr + $25,500 current depr =$87,500 book value - $53,600 sale amount = $33,900 gain).
Remember we subtract out the gain in the operating section because it is not cash but gets recorded as part of net income.
There are three most common tools for financial analysis. 1) ___________ is the comparison of a company's financial condition and performance to a base amount. 2) ______________ is the comparison of a company's financial condition and performance across time
1) Vertical Analysis; 2) Horizontal Analysis; 3) Ratios