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Exam 14: Financial Statement Analysis

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Question 111

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$\text { Harding Company }$ $\begin{array}{lr}\text { Accounts payable } & 40,000 \\\text { Accounts receivable } & 65,000 \\\text { Accrued liabilities } & 7,000 \\\text { Cash } & 30,000 \\\text { Intangible assets } & 40,000 \\\text { Inventory } & 72,000 \\\text { Long-term investments } & 110,000 \\\text { Long-term liabilities } & 75,000 \\\text { Marketable securities } & 36,000 \\\text { Notes payable (short-term) } & 30,000 \\\text { Property, plant, and equipment } & 625,000 \\\text { Prepaid expenses } & 2,000\end{array}$ -Based on the data for Harding Company, what is the amount of working capital?

A) $238,000
B) $128,000
C) $168,000
D) $203,000

E) A) and B)
F) A) and C)

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Question 112

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Rho, Sigma, and Tau Companies have the following data for the current year: ​ $\begin{array} { | l | c | c | c | } \hline & \text { Rho Company } & \text { Sigma Company } & \text { Tau Company } \\\hline \text { Frice-earnings ratio } & 23.7 & 16.9 & 30.1 \\\hline\end{array}$ ​ Which company would be expected to have the best potential for future common stock price appreciation?

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The price-earnings (P/E) ratio on common...

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Question 113

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The price-earnings ratio on common stock is calculated as

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -ratio of liabilities to stockholders' equity

The following information has been condensed from the December 31 balance sheets of Gabriel Co.: $\begin{array}{l}&\text { Year } 2&\text { Year } 1\\\text { Assets: }\\\text { Current assets } & \$ 825,500 & \$ 674,300 \\\text { Fixed assets (net) } & 1,473,600 & 1,275,300\\\text { Total assets } & \$ 2,299,100 &\$ 1,949,600\\\\\text { Liabilities: }\\\text { Current liabilities } & \$ 313,500 & \$ 309,600 \\\text { Long-term liabilities } & 703,000 & 545,000 \\\text { Total liabilities } & \$ 1,016,500 & \$ 854,600 \\\text { Stockhol ders' equity } & \$ 1,282,600 & \$ 1,095 ,000\\\text { Total liabilities and }\\\text { stockholders' equity }&\$2,299,100&\$1,949,600\end{array}$ ​ (a) Determine the ratio of fixed assets to long-term liabilities for each year. (b) Determine the ratio of liabilities to stockholders' equity for each year. (c) Comment on the year-to-year changes for both ratios. Round your answers to two decimal places.

Income statement information for Lucy Company is provided below: $\begin{array} { l l } \text { Sales } & \$ 175,000 \\\text { Cost of goods sold } & 105,000 \\\text { Gross profit } & \$ 70,000\end{array}$ ​ Prepare a vertical analysis of the income statement for Lucy Company.

Short-term creditors are typically most interested in analyzing a company's