The following information is available on Toy Inc. There are 100 shares outstanding, each selling for $25

Size: px
Start display at page:

Download "The following information is available on Toy Inc. There are 100 shares outstanding, each selling for $25"

Transcription

1 The following information is available on Toy Inc. There are 100 shares outstanding, each selling for $25 Corporate tax 34.00% Interest rate 4.25% Retention ratio 65.00% Case A. Toy Inc. Zero growth in sales Today Sales $5, $5, % (Costs) $3, $3, % (Depreciation) $1, $1, % EBIT $80.75 $ % (Interest) $80.75 $ % EBT $0.00 $ % (Tax) $0.00 $ % Net income $0.00 $ % Addition to RE $0.00 $ % Dividend $0.00 $0.00 0% Toy Inc. Zero growth in sales Cash $ $ A/P $ $ Inventory $ $ N/P $ $ A/R $ $ Total CL $ $ Current assets $1, $1, LT debt $1, $1, Gross fixed assets $3, $3, Other long-term $0.00 $0.00 Depreciation $1, $2, Shares $1, $1, Net fixed assets $2, $1, Retained earnings $0.00 $0.00 Other assets $ $ Total equity $1, $1, Total assets $3, $2, Total L&E $3, $3, $1, What happens if we repurchase 40 shares at $25 each? Cash $ $ A/P $ $ Inventory $ $ N/P $ $ A/R $ $ Total CL $ $ Current assets $1, $1, LT debt $1, $1, Gross fixed assets $3, $3, Other long-term $0.00 $0.00 Depreciation $1, $2, Shares $1, $1, Net fixed assets $2, $1, Retained earnings $0.00 -$1, Other assets $ $ Total equity $1, $ Total assets $3, $2, Total L&E $3, $2,

2 Today NWC $ $ Curent ratio Quick ratio Cash ratio TAT FAT D/E TIE % Cash coverage Profit margin 0.00% 0.00% ROA 0.00% 0.00% ROE 0.00% 0.00% Dividend per share $0.00 $0.00 EPS $0.00 $0 Book value per share $13.00 $5.00 Dividend yield $0.00 $0.00 Cash flows CF to creditors $80.75 CF to shareholders $1, CF from assets $1, Discussion: In this example sales are such that they barely cover the costs of goods sold, depreciation, and interest. The firm has zero net income: no earnings, and no loss either. This is what accountants call break-even. Notice that in spite of posting no profit, the firm still has a financing surplus. This is so because depreciation (for tax purposes) is not a cash outlay, rather a mere deduction aimed at matching cash outlays incurred earlier to current revenues. We could have invested the surplus in various assets, but if one repurchases shares every year, in the long run one will just recover the value of the initial capital invested in the firm. 2

3 Case B Toy Inc. Zero growth in sales Today Change Sales $5, $5, % (Costs) $4, $4, % (Depreciation) $1, $1, % EBIT -$ $ % (Interest) $80.75 $ % EBT -$1, $1, % (Tax) $0.00 $ % Net income -$1, $1, % Addition to RE -$1, $1, % Dividend $0.00 $ % Cash $ $ A/P $ $ Inventory $ $ N/P $ $ A/R $ $ Current liabilities $ $ Current assets $1, $1, Long-term debt $1, $1, Gross fixed assets $3, $3, Other long-term $0.00 $0.00 Depreciation $1, $2, Outstanding shares $2, $2, Net fixed assets $2, $1, Retained earnings ($1,000.00) ($2,000.00) Other assets $ $ Owner's equity $1, $ Total assets $3, $2, Total L&E $3, $2, Discussion In this example sales are such that they barely cover the costs of good sold, and interest. The firm has posted a loss. At first glance, it appears that there is no financing deficit (yet). However, the stock of equity capital and productive assets are slowly depleting and the firm will go out of business in the long-run. This particular case offers an insight into the predicament of large corporate dinosaurs that continue to operate in spite of routinely posting losses: the managers keep those companies running (so that they can get their multi-million compensation packages) by barely meeting interest payments. Meanwhile, they are hopelessly depleting the capital of common shareholders (and that of taxpayers, when the government steps in to bail them out). Note how misleading some performance metric can be even here (TAT for example). 3

4 Today NWC $ $ NWC change from last period $0.00 $0.00 Curent ratio Quick ratio Cash ratio TAT FAT NWC turnover InventTurnover Day's Sales in Inventory ReceivTurnover Day's Sales in Receivables D/E Total debt ratio LT debt ratio TIE Cash coverage Profit margin % % ROA % % ROE % % Dividend per share $0.00 $0.00 EPS -$ $10.00 Book value per share $13.00 $3.00 Dividend yield 0.00% 0.00% CF to creditors $80.75 CF to shareholders $0.00 CF from assets $

5 Case C. Toy Inc at 99% capacity utilization and 10% growth in sales. Costs, current assets, and accounts payable increase proportional to sales. An additional plant costs $2,000. Today Change Sales $5, $5, % (Costs) $3, $3, % (Depreciation) $1, $1, % EBIT $ $ % (Interest) $80.75 $ % EBT $ $ % (Tax) $ $ % Net income $ $ % Addition to RE $ $ % Dividend $96.85 $ % Cash $ $ A/P $ $ Inventory $ $ N/P $ $ A/R $ $ Current liabilities $ $ Current assets $1, $1, Long-term debt $1, $1, Gross fixed assets $3, $5, Other long-term $0.00 $0.00 Depreciation $1, $2, Outstanding shares $1, $1, Net fixed assets $2, $2, Retained earnings $ $82.44 Other assets $ $ Owner's equity $1, $1, Total assets $3, $3, Surplus/Deficit Total L&E $3, $3, $

6 Finance with long-term debt Cash $ $ A/P $ $ Inventory $ $ N/P $ $ A/R $ $ Current liabilities $ $ Current assets $1, $1, Long-term debt $1, $2, Gross fixed assets $3, $5, Other long-term $0.00 $0.00 Depreciation $1, $2, Outstanding shares $1, $1, Net fixed assets $2, $2, Retained earnings $ $82.44 Other assets $ $ Owner's equity $1, $1, Total assets $3, $3, Total L&E $3, $3, Today NWC $ $ NWC change from last period $0.00 $70.00 Curent ratio Quick ratio Cash ratio TAT FAT D/E Profit margin 5.53% -1.77% ROA 7.91% -2.48% ROE 21.29% -8.10% Dividend per share $0.97 $0.00 EPS $2.77 -$0.97 Book value per share $13.00 $12.03 Dividend yield 3.87% 0.00% CF to creditors -$ CF to shareholders $0.00 CF from assets -$

Income Measurement and Profitability Analysis

Income Measurement and Profitability Analysis PROFITABILITY ANALYSIS The following financial statements for Spencer Company will be used to demonstrate the calculation of the various ratios in profitability analysis. Spencer Company Comparative Balance

More information

Key Concepts and Skills. Standardized Financial. Chapter Outline. Ratio Analysis. Categories of Financial Ratios 1-1. Chapter 3

Key Concepts and Skills. Standardized Financial. Chapter Outline. Ratio Analysis. Categories of Financial Ratios 1-1. Chapter 3 Key Concepts and Skills Chapter 3 Working With Financial Statements Know how to standardize financial statements for comparison purposes Know how to compute and interpret important financial ratios Know

More information

Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio =

Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio = 1 Computing Liquidity Ratios Current Ratio = CA / CL 708 / 540 = 1.31 times Quick Ratio = (CA Inventory) / CL (708 422) / 540 =.53 times Cash Ratio = Cash / CL 98 / 540 =.18 times 2 Computing Leverage

More information

Chapter 17: Financial Statement Analysis

Chapter 17: Financial Statement Analysis FIN 301 Class Notes Chapter 17: Financial Statement Analysis INTRODUCTION Financial ratio: is a relationship between different accounting items that tells something about the firm s activities. Purpose

More information

Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability

Ratio Analysis. A) Liquidity Ratio : - 1) Current ratio = Current asset Current Liability A) Liquidity Ratio : - Ratio Analysis 1) Current ratio = Current asset Current Liability 2) Quick ratio or Acid Test ratio = Quick Asset Quick liability Quick Asset = Current Asset Stock Quick Liability

More information

Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

More information

Chapters 3 and 13 Financial Statement and Cash Flow Analysis

Chapters 3 and 13 Financial Statement and Cash Flow Analysis Chapters 3 and 13 Financial Statement and Cash Flow Analysis Balance Sheet Assets Cash Inventory Accounts Receivable Property Plant Equipment Total Assets Liabilities and Shareholder s Equity Accounts

More information

CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW

CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW CHAPTER 2 FINANCIAL STATEMENTS AND CASH FLOW Solutions to Questions and Problems NOTE: All end-of-chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and

More information

Essential Learning for CTP Candidates TEXPO Conference 2016 Session #03

Essential Learning for CTP Candidates TEXPO Conference 2016 Session #03 TEXPO Conference 2016: Essential Learning for CTP Candidates Session #3 (Mon.1:45 3:00 pm) Overview of Basic CTP Math from ETM4 Chap 07: Earnings Credits Chap 09: Working Capital Chap 18: Fin. Statements

More information

Financial Statement and Cash Flow Analysis

Financial Statement and Cash Flow Analysis Chapter 2 Financial Statement and Cash Flow Analysis Answers to Concept Review Questions 1. What role do the FASB and SEC play with regard to GAAP? The FASB is a nongovernmental, professional standards

More information

FNCE 3010 (Durham). HW2 (Financial ratios)

FNCE 3010 (Durham). HW2 (Financial ratios) FNCE 3010 (Durham). HW2 (Financial ratios) 1. What effect would the following actions have on a firms net working capital and current ratio (assume NWC is positive and current ratio is initially greater

More information

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used:

Financial ratios can be classified according to the information they provide. The following types of ratios frequently are used: Financial Ratios Financial ratios are useful indicators of a firm's performance and financial situation. Most ratios can be calculated from information provided by the financial statements. Financial ratios

More information

14. Calculating Total Cash Flows.

14. Calculating Total Cash Flows. 14. Calculating Total Cash Flows. Greene Co. shows the following information on its 2008 income statement: Sales = $138,000 Costs = $71,500 Other expenses = $4,100 Depreciation expense = $10,100 Interest

More information

FSA Note: Summary of Financial Ratio Calculations

FSA Note: Summary of Financial Ratio Calculations FSA Note: Summary of Financial Ratio Calculations This note contains a summary of the more common financial statement ratios. A few points should be noted: Calculations vary in practice; consistency and

More information

NWC = current assets - current liabilities = 2,100

NWC = current assets - current liabilities = 2,100 Questions and Problems Chapters 2,3 pp45-47 1. Building a balance sheet. Penguin Pucks, Inc., has current assets of $3,000, net fixed assets $6,000, current liabilities of $900, and long-term debt of $5,000.

More information

Liquidity analysis: Length of cash cycle

Liquidity analysis: Length of cash cycle 2. Liquidity analysis: Length of cash cycle Operating cycle of a merchandising firm: number of days it takes to sell inventory + number of days until the resulting receivables are converted to cash Acquisition

More information

2-8. Identify whether each of the following items increases or decreases cash flow:

2-8. Identify whether each of the following items increases or decreases cash flow: Problems 2-8. Identify whether each of the following items increases or decreases cash flow: Increase in accounts receivable Increase in notes payable Depreciation expense Increase in investments Decrease

More information

Chapter 1 Financial Statement and Cash Flow Analysis

Chapter 1 Financial Statement and Cash Flow Analysis Chapter 1 Financial Statement and Cash Flow Analysis MULTIPLE CHOICE 1. Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory

More information

Return on Equity has three ratio components. The three ratios that make up Return on Equity are:

Return on Equity has three ratio components. The three ratios that make up Return on Equity are: Evaluating Financial Performance Chapter 1 Return on Equity Why Use Ratios? It has been said that you must measure what you expect to manage and accomplish. Without measurement, you have no reference to

More information

Ratio Analysis 0.75. Fixed Assets Fixed Assets + Net Working Capital =0.75 Fixed Assets

Ratio Analysis 0.75. Fixed Assets Fixed Assets + Net Working Capital =0.75 Fixed Assets Ratio Analysis CA Past Years Exam Answer Answer to Q.1: (Nov, 009) Fixed assets ` 18,00,000 Proprietor s funds ` 4,00,000 Note: 1 Ratio of fixed assets to proprietor s funds 0.75 Properietors Fund 0.75

More information

Ratio Analysis CBDC, NB. Presented by ACSBE. February, 2008. Copyright 2007 ACSBE. All Rights Reserved.

Ratio Analysis CBDC, NB. Presented by ACSBE. February, 2008. Copyright 2007 ACSBE. All Rights Reserved. Ratio Analysis CBDC, NB February, 2008 Presented by ACSBE Financial Analysis What is Financial Analysis? What Can Financial Ratios Tell? 7 Categories of Financial Ratios Significance of Using Ratios Industry

More information

Chapter 2 Financial Statement and Cash Flow Analysis

Chapter 2 Financial Statement and Cash Flow Analysis Chapter 2 Financial Statement and Cash Flow Analysis MULTIPLE CHOICE 1. Which of the following items can be found on an income statement? a. Accounts receivable b. Long-term debt c. Sales d. Inventory

More information

TYPES OF FINANCIAL RATIOS

TYPES OF FINANCIAL RATIOS TYPES OF FINANCIAL RATIOS In the previous articles we discussed how to invest in the stock market and unit trusts. When investing in the stock market an investor should have a clear understanding about

More information

CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH

CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 1. Time trend analysis gives a picture of changes in the company s financial situation over

More information

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated?

What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? What Do Short-Term Liquidity Ratios Measure? What Is Working Capital? HOCK international - 2004 1 HOCK international - 2004 2 How Is the Current Ratio Calculated? How Is the Quick Ratio Calculated? HOCK

More information

Comprehensive exam Feb.11

Comprehensive exam Feb.11 Comprehensive exam Feb.11 1 Objectives of the examination Apply the financial management concept to evaluate the company s performance. Relate the results of the analysis to make financial decisions or

More information

Chapter. How Well Am I Doing? Financial Statement Analysis

Chapter. How Well Am I Doing? Financial Statement Analysis Chapter 17 How Well Am I Doing? Financial Statement Analysis 17-2 LEARNING OBJECTIVES After studying this chapter, you should be able to: 1. Explain the need for and limitations of financial statement

More information

Course 1: Evaluating Financial Performance

Course 1: Evaluating Financial Performance Excellence in Financial Management Course 1: Evaluating Financial Performance Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides a basic understanding of how to use ratio analysis for evaluating

More information

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION

ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION ICAP GROUP S.A. FINANCIAL RATIOS EXPLANATION OCTOBER 2006 Table of Contents 1. INTRODUCTION... 3 2. FINANCIAL RATIOS FOR COMPANIES (INDUSTRY - COMMERCE - SERVICES) 4 2.1 Profitability Ratios...4 2.2 Viability

More information

Total shares at the end of ten years is 100*(1+5%) 10 =162.9.

Total shares at the end of ten years is 100*(1+5%) 10 =162.9. FCS5510 Sample Homework Problems Unit04 CHAPTER 8 STOCK PROBLEMS 1. An investor buys 100 shares if a $40 stock that pays a annual cash dividend of $2 a share (a 5% dividend yield) and signs up for the

More information

Finance Master. Winter 2015/16. Jprof. Narly Dwarkasing University of Bonn, IFS

Finance Master. Winter 2015/16. Jprof. Narly Dwarkasing University of Bonn, IFS Finance Master Winter 2015/16 Jprof. Narly Dwarkasing University of Bonn, IFS Chapter 2 Outline 2.1 Firms Disclosure of Financial Information 2.2 The Balance Sheet 2.3 The Income Statement 2.4 The Statement

More information

CHAPTER 2 INTRODUCTION TO CORPORATE FINANCE

CHAPTER 2 INTRODUCTION TO CORPORATE FINANCE CHAPTER 2 INTRODUCTION TO CORPORATE FINANCE Solutions to Questions and Problems NOTE: All end of chapter problems were solved using a spreadsheet. Many problems require multiple steps. Due to space and

More information

2. More important - provide a profile of firm s economic characteristics and competitive strategies.

2. More important - provide a profile of firm s economic characteristics and competitive strategies. RATIO ANALYSIS-OVERVIEW Ratios: 1. Provide a method of standardization 2. More important - provide a profile of firm s economic characteristics and competitive strategies. Although extremely valuable as

More information

Interpretation of Financial Statements

Interpretation of Financial Statements Interpretation of Financial Statements Author Noel O Brien, Formation 2 Accounting Framework Examiner. An important component of most introductory financial accounting programmes is the analysis and interpretation

More information

Discussion Board Articles Ratio Analysis

Discussion Board Articles Ratio Analysis Excellence in Financial Management Discussion Board Articles Ratio Analysis Written by: Matt H. Evans, CPA, CMA, CFM All articles can be viewed on the internet at www.exinfm.com/board Ratio Analysis Cash

More information

CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW

CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW CHAPTER 2 ACCOUNTING STATEMENTS, TAXES, AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. True. Every asset can be converted to cash at some price. However, when we are referring

More information

Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes

Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Course Overview The Advanced Placement (AP) Accounting Course & Exam Pilot Program

More information

Vol. 2, Chapter 15 Ratio Analysis

Vol. 2, Chapter 15 Ratio Analysis Vol. 2, Chapter 15 Ratio Analysis Problem 1: Solution Transaction Total CurrentWorking Current No. Assets Capital Ratio 1 0 0 0 2 + + + 3 0 0 0 4 0 - - 5-0 + 6 - - - 7 0 0 0 8 0 0 0 9 - - - 10-0 + Problem

More information

Chapter 12 Financial Planning and Forecasting Financial Statements ANSWERS TO END-OF-CHAPTER QUESTIONS

Chapter 12 Financial Planning and Forecasting Financial Statements ANSWERS TO END-OF-CHAPTER QUESTIONS Chapter 12 Financial Planning and Forecasting Financial Statements ANSWERS TO END-OF-CHAPTER QUESTIONS 12-1 a. The operating plan provides detailed implementation guidance designed to accomplish corporate

More information

Oklahoma State University Spears School of Business. Financial Statements

Oklahoma State University Spears School of Business. Financial Statements Oklahoma State University Spears School of Business Financial Statements Slide 2 Sources of Information Annual reports (10K) & Quarterly reports (10Q) SEC EDGAR Major databases COMPUSTAT(access through

More information

Advanced Placement (AP) Accounting

Advanced Placement (AP) Accounting Advanced Placement (AP) Accounting The Advanced Placement (AP) Accounting Course is a full academic year course. The course is based on high school teachers having 120 contact hours with students from

More information

Financial ratio analysis

Financial ratio analysis Financial ratio analysis A reading prepared by Pamela Peterson Drake O U T L I N E 1. Introduction 2. Liquidity ratios 3. Profitability ratios and activity ratios 4. Financial leverage ratios 5. Shareholder

More information

Financial Ratio Cheatsheet MyAccountingCourse.com PDF

Financial Ratio Cheatsheet MyAccountingCourse.com PDF Financial Ratio Cheatsheet MyAccountingCourse.com PDF Table of contents Liquidity Ratios Solvency Ratios Efficiency Ratios Profitability Ratios Market Prospect Ratios Coverage Ratios CPA Exam Ratios to

More information

WJEC Applied Business A level. ABUS 1 and ABUS 5

WJEC Applied Business A level. ABUS 1 and ABUS 5 1 WJEC Applied Business A level ABUS 1 and ABUS 5 Additional information: formulae, layout and terminology ABUS 1 and ABUS 5 Accounting terminology A number of the terms used in Accounting are changing,

More information

1. Operating, Investment and Financial Cash Flows

1. Operating, Investment and Financial Cash Flows 1. Operating, Investment and Financial Cash Flows Solutions Problem 1 During 2005, Myears Oil Co. had gross sales of $1 000,000, cost of goods sold of $400,000, and general and selling expenses of $300,000.

More information

CHAPTER 4. FINANCIAL STATEMENTS

CHAPTER 4. FINANCIAL STATEMENTS CHAPTER 4. FINANCIAL STATEMENTS Accounting standards require statements that show the financial position, earnings, cash flows, and investment (distribution) by (to) owners. These measurements are reported,

More information

Credit Analysis 10-1

Credit Analysis 10-1 Credit Analysis 10-1 10-2 Liquidity and Working Capital Basics Liquidity - Ability to convert assets into cash or to obtain cash to meet short-term obligations. Short-term - Conventionally viewed as a

More information

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements

Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements Understanding Financial Information for Bankruptcy Lawyers Understanding Financial Statements In the United States, businesses generally present financial information in the form of financial statements

More information

9901_1. A. 74.19 days B. 151.21 days C. 138.46 days D. 121.07 days E. 84.76 days

9901_1. A. 74.19 days B. 151.21 days C. 138.46 days D. 121.07 days E. 84.76 days 1. A stakeholder is: 9901_1 Student: A. a creditor to whom a firm currently owes money. B. any person who has voting rights based on stock ownership of a corporation. C. any person or entity other than

More information

CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH

CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH CHAPTER 3 LONG-TERM FINANCIAL PLANNING AND GROWTH Answers to Concepts Review and Critical Thinking Questions 5. The sustainable growth rate is greater than 20 percent, because at a 20 percent growth rate

More information

Financial Planning for East Coast Yachts

Financial Planning for East Coast Yachts Financial Planning for East Coast Yachts Prepared for East Coast Yachts Prepared by Dan Ervin, Mary-Ann Lawrence, Kevin Klepacki, Katie Wilson, Andrew Wright January 1, 2010 Table of Contents iii Table

More information

MBA Financial Management and Markets Spring 2011 Dr. A. Frank Thompson Due: February 28, 2011 Competency Exam 1 Directions: Please answer the

MBA Financial Management and Markets Spring 2011 Dr. A. Frank Thompson Due: February 28, 2011 Competency Exam 1 Directions: Please answer the MBA Financial Management and Markets Spring 2011 Dr. A. Frank Thompson Due: February 28, 2011 Competency Exam 1 Directions: Please answer the following 33 questions designed to test your knowledge of the

More information

Brain J. Dunn, CEO Richfield, Minnesota U.S Latest fiscal year: 2010 Best Buy is an American retailer that sells a wide variety of electronic

Brain J. Dunn, CEO Richfield, Minnesota U.S Latest fiscal year: 2010 Best Buy is an American retailer that sells a wide variety of electronic Current Shareholders in Best Buy should hold their stock until price increases, and new investors should not invest if looking for fast money, Best Buy s stock may not more until more economic growth occurs.

More information

Integrated Case. 4-25 D Leon Inc., Part II Financial Statement Analysis

Integrated Case. 4-25 D Leon Inc., Part II Financial Statement Analysis Integrated Case 4-25 D Leon Inc., Part II Financial Statement Analysis Part I of this case, presented in Chapter 3, discussed the situation of D Leon Inc., a regional snack foods producer, after an expansion

More information

Chapter-3 Solutions to Problems

Chapter-3 Solutions to Problems Chapter-3 Solutions to Problems P3-1. P3-2. Reviewing basic financial statements LG 1; Basic Income statement: In this one-year summary of the firm s operations, Technica, Inc. showed a net profit for

More information

Advanced Placement (AP) Accounting Course and Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes

Advanced Placement (AP) Accounting Course and Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Advanced Placement (AP) Accounting Course and Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Course Overview The Advanced Placement (AP) Accounting Course and Exam Pilot Program

More information

UNDERSTANDING FINANCE AND MEMBER EQUITY MY EXPERIENCE AGENDA

UNDERSTANDING FINANCE AND MEMBER EQUITY MY EXPERIENCE AGENDA UNDERSTANDING FINANCE AND MEMBER EQUITY A Special Presentation for the Strengthening Cooperation Workshop February 21, 2006 by Brian Henehan Senior Extension Associate Cornell Cooperative Enterprise Program

More information

Chapter Financial Forecasting

Chapter Financial Forecasting Chapter Financial Forecasting PPT 4-2 Chapter 4 - Outline What is Financial Forecasting? 3 Financial Statements for Forecasting Constructing Pro Forma Statements Basis for Sales Projections Steps in a

More information

Engineering Economics 2013/2014 MISE

Engineering Economics 2013/2014 MISE Problem: JS, Inc. shows the following accounting records for 2011: Sales commissions 15000 Beginning merchandise inventory 16000 Ending merchandise inventory 9000 Sales 185000 Advertising 10000 Purchases

More information

Creating a Successful Financial Plan

Creating a Successful Financial Plan Creating a Successful Financial Plan Basic Financial Reports Balance Sheet - Estimates the firm s worth on a given date; built on the accounting equation: Assets = Liabilities + Owner s Equity Income Statement

More information

Using Accounts to Interpret Performance

Using Accounts to Interpret Performance Using s to Interpret Performance ing information is used by stakeholders to judge the performance and efficiency of a business Different stakeholders will look for different things: STAKEHOLDER Shareholders

More information

Chapter 6 Statement of Cash Flows

Chapter 6 Statement of Cash Flows Chapter 6 Statement of Cash Flows The Statement of Cash Flows describes the cash inflows and outflows for the firm based upon three categories of activities. Operating Activities: Generally include transactions

More information

Ratios from the Statement of Financial Position

Ratios from the Statement of Financial Position For The Year Ended 31 March 2007 Ratios from the Statement of Financial Position Profitability Ratios Return on Sales Ratio (%) This is the difference between what a business takes in and what it spends

More information

Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes

Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Advanced Placement (AP) Accounting Course & Exam Pilot Program Course Outline, Learning Objectives and Student Outcomes Course Overview The Advanced Placement (AP) Accounting Course & Exam Pilot Program

More information

Often stock is split to lower the price per share so it is more accessible to investors. The stock split is not taxable.

Often stock is split to lower the price per share so it is more accessible to investors. The stock split is not taxable. Reading: Chapter 8 Chapter 8. Stock: Introduction 1. Rights of stockholders 2. Cash dividends 3. Stock dividends 4. The stock split 5. Stock repurchases and liquidations 6. Preferred stock 7. Analysis

More information

Atthapol Charoenkietkrai ACG2021 Section 2

Atthapol Charoenkietkrai ACG2021 Section 2 Atthapol Charoenkietkrai ACG2021 Section 2 Amazon has been in a good position for the last few years and still on a rise. The assets have increased, and the debt has decreased. The company has exponentially

More information

Analyzing the Statement of Cash Flows

Analyzing the Statement of Cash Flows Analyzing the Statement of Cash Flows Operating Activities NACM Upstate New York Credit Conference 2015 By Ron Sereika, CCE,CEW NACM 1 Objectives of this Educational Session u Show how the statement of

More information

Using Financial Ratios: Interested Parties

Using Financial Ratios: Interested Parties Using Financial Ratios: Interested Parties Ratio analysis involves methods of calculating and interpreting financial ratios to assess a firm s financial condition and performance. It is of interest to

More information

Guide to Financial Statements Study Guide

Guide to Financial Statements Study Guide Guide to Financial Statements Study Guide Overview (Topic 1) Three major financial statements: The Income Statement The Balance Sheet The Cash Flow Statement Objectives: Explain the underlying equation

More information

ISS Governance Services Proxy Research. Company Financials Compustat Data Definitions

ISS Governance Services Proxy Research. Company Financials Compustat Data Definitions ISS Governance Services Proxy Research Company Financials Compustat Data Definitions June, 2008 TABLE OF CONTENTS Data Page Overview 3 Stock Snapshot 1. Closing Price 3 2. Common Shares Outstanding 3 3.

More information

2. More important - provide a profile of firm s economic characteristics and competitive strategies.

2. More important - provide a profile of firm s economic characteristics and competitive strategies. RATIO ANALYSIS-OVERVIEW Ratios: 1. Provide a method of standardization 2. More important - provide a profile of firm s economic characteristics and competitive strategies. C Company Sales $ 100,000 $ 125,000

More information

E2-2: Identifying Financing, Investing and Operating Transactions?

E2-2: Identifying Financing, Investing and Operating Transactions? E2-2: Identifying Financing, Investing and Operating Transactions? Listed below are eight transactions. In each case, identify whether the transaction is an example of financing, investing or operating

More information

The Interpretation of Financial Statements. Why use ratio analysis. Limitations. Chapter 16

The Interpretation of Financial Statements. Why use ratio analysis. Limitations. Chapter 16 The Interpretation of Financial Statements Chapter 16 1 Luby & O Donoghue (2005) Why use ratio analysis Provides framework Comparison to previous years Trends identified Identify areas of concern Targets

More information

Vertical and Horizontal Analysis. Financial Analysis. Lecturer: Dr. Constantinos Adamides

Vertical and Horizontal Analysis. Financial Analysis. Lecturer: Dr. Constantinos Adamides Vertical and Horizontal Analysis Financial Analysis Lecturer: Dr. Constantinos Adamides Horizontal Analysis Comparison of financial information of a single company for two more years Examination of absolute

More information

Chapter 2 Financial Statements and Analysis

Chapter 2 Financial Statements and Analysis Chapter 2 Financial Statements and Analysis Solutions to Problems P2-1. LG 1: Reviewing Financial Statements Income statement: In this one-year summary of the firm s operations, Technica, Inc. showed a

More information

OBIEE 11g Pre-Built Dashboards from Oracle Courtesy: Oracle OBIEE 11g Deployment on Vision Demo Data FINANCIALS

OBIEE 11g Pre-Built Dashboards from Oracle Courtesy: Oracle OBIEE 11g Deployment on Vision Demo Data FINANCIALS FINANCIALS General Ledger The General Ledger module provides insight into key financial areas of performance, including balance sheet, cash flow, budget vs. actual, working capital, liquidity. Dashboard

More information

Chapter 18. Financial Planning. Answers to Concept Review Questions

Chapter 18. Financial Planning. Answers to Concept Review Questions Chapter 18 Financial Planning Answers to Concept Review Questions 1. What is the financial planning process? What is a strategic plan? Describe the roles that financial managers play with regard to strategic

More information

MBA Finance Part-Time Financial Statement Analysis and Cash Flows

MBA Finance Part-Time Financial Statement Analysis and Cash Flows MBA Finance Part-Time Financial Statement Analysis and Cash Flows Professor Hugues Pirotte Spéder 1 1 Levers of Performance Return on Equity Return on Invested Capital Leverage Profit Margin Asset Turnover

More information

Associated Files: Ratios worksheet

Associated Files: Ratios worksheet Unit 4 Business accounting Ratios Instructions and answers for Teachers These instructions should accompany the OCR resource Ratios which supports the OCR Level 3 Cambridge Technicals in Business Unit

More information

HTC CORPORATION 2Q15 BUSINESS REVIEW. CHIALIN CHANG, CFO & PRESIDENT OF GLOBAL SALES EDWARD WANG, VP OF FINANCE AUGUST 6 th, 2015

HTC CORPORATION 2Q15 BUSINESS REVIEW. CHIALIN CHANG, CFO & PRESIDENT OF GLOBAL SALES EDWARD WANG, VP OF FINANCE AUGUST 6 th, 2015 HTC CORPORATION 2Q15 BUSINESS REVIEW CHIALIN CHANG, CFO & PRESIDENT OF GLOBAL SALES EDWARD WANG, VP OF FINANCE AUGUST 6 th, 2015 DISCLAIMER STATEMENT This presentation and release contain forward-looking

More information

Financial Formulas. 5/2000 Chapter 3 Financial Formulas i

Financial Formulas. 5/2000 Chapter 3 Financial Formulas i Financial Formulas 3 Financial Formulas i In this chapter 1 Formulas Used in Financial Calculations 1 Statements of Changes in Financial Position (Total $) 1 Cash Flow ($ millions) 1 Statements of Changes

More information

Lecture 5 - Financial Planning and Forecasting

Lecture 5 - Financial Planning and Forecasting Lecture 5 - Financial Planning and Forecasting Strategy A company s strategy consists of the competitive moves, internal operating approaches, and action plans devised by management to produce successful

More information

Accounting Pilot & Bridge Project Course Outline, Learning Objectives and Student Outcomes

Accounting Pilot & Bridge Project Course Outline, Learning Objectives and Student Outcomes Accounting Pilot & Bridge Project Course Outline, Learning Objectives and Student Outcomes Course Overview The Accounting Pilot & Bridge Project is a year-long course based on high school teachers having

More information

Financial Statements and Ratios: Notes

Financial Statements and Ratios: Notes Financial Statements and Ratios: Notes 1. Uses of the income statement for evaluation Investors use the income statement to help judge their return on investment and creditors (lenders) use it to help

More information

FI3300 Corporation Finance

FI3300 Corporation Finance Learning Objectives FI3300 Corporation Finance Spring Semester 2010 Dr. Isabel Tkatch Assistant Professor of Finance Explain the objectives of financial statement analysis and its benefits for creditors,

More information

Financial Ratios Used In BSG-Online

Financial Ratios Used In BSG-Online Financial Ratios Used In BSG-Online Profitability Ratios (as reported on pages 2 and 5 of the Footwear Industry Report) Earnings per share (EPS) is defined as net income divided by the number of shares

More information

FINANCIAL ACCOUNTING TOPIC: FINANCIAL ANALYSIS

FINANCIAL ACCOUNTING TOPIC: FINANCIAL ANALYSIS SYLLABUS Compulsory part Basic ratio analysis 1. State the general functions of accounting ratios. 2. Calculate and interpret the following ratios: a. working capital/current ratio, quick/liquid/acid test

More information

CHAPTER 6. P.6.17 The following are the ratios relating to the activities of National Traders Ltd:

CHAPTER 6. P.6.17 The following are the ratios relating to the activities of National Traders Ltd: CHAPTER 6 Solved Problems P.6.17 The following are the ratios relating to the activities of National Traders Ltd: Debtors velocity (months) 3 Stock velocity (months) 8 Creditors velocity (months) 2 Gross

More information

Profitability Ratio Analysis

Profitability Ratio Analysis Profitability Ratio Analysis Profitability Ratios Purpose: Provide insight about ability to generate income Return on assets = Net income + interest * (1 - tax rate) Assets Return on equity = Net income

More information

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions

Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Understanding Financial Management: A Practical Guide Guideline Answers to the Concept Check Questions Chapter 3 Interpreting Financial Ratios Concept Check 3.1 1. What are the different motivations that

More information

Ratio Analysis: Liquidity, Activity & Coverage

Ratio Analysis: Liquidity, Activity & Coverage Ratio Analysis: Liquidity, Activity & Coverage Quality of Earnings Fraudulent actions Above-average financial risk One-time transactions Borrow from the future/reach into the past Ride the depreciation

More information

RAPID REVIEW Chapter Content

RAPID REVIEW Chapter Content RAPID REVIEW BASIC ACCOUNTING EQUATION (Chapter 2) INVENTORY (Chapters 5 and 6) Basic Equation Assets Owner s Equity Expanded Owner s Owner s Assets Equation = Liabilities Capital Drawing Revenues Debit

More information

CHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW

CHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW CHAPTER 2 FINANCIAL STATEMENTS, TAXES AND CASH FLOW Answers to Concepts Review and Critical Thinking Questions 1. Liquidity measures how quickly and easily an asset can be converted to cash without significant

More information

Chapter 3 Financial Statements Analysis and Long-Term Planning

Chapter 3 Financial Statements Analysis and Long-Term Planning University of Science and Technology Beijing Dongling School of Economics and management Chapter 3 Financial Statements Analysis and Long-Term Planning Sep. 2012 Dr. Xiao Ming USTB 1 Key Concepts and Skills

More information

Teacher Resource Bank

Teacher Resource Bank Teacher Resource Bank GCE Accounting Other Guidance: Layouts and Formulae ACCN1: Layouts ACCN2: Layouts and Formulae ACCN4: Layouts and Formulae (Updated July 2012) The Assessment and Qualifications Alliance

More information

Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings

Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings Chapter 4 Adjustments, Financial Statements, and the Quality of Earnings ANSWERS TO QUESTIONS 1. Adjusting entries are made at the end of the accounting period to record all revenues and expenses that

More information

Performance Review. Sample Company

Performance Review. Sample Company Performance Review Sample Company For the period ended 12/31/2017 Provided By Page 1 / 18 This report is designed to assist you in your business' development. Below you will find your overall ranking,

More information

Finance and Accounting For Non-Financial Managers

Finance and Accounting For Non-Financial Managers Finance and Accounting For Non-Financial Managers Accounting/Finance Recording, classifying, and summarizing financial transactions in terms of dollars and their interpretation 1 Key Accounting Terms Accounting

More information

FINANCIAL MANAGEMENT

FINANCIAL MANAGEMENT 100 Arbor Drive, Suite 108 Christiansburg, VA 24073 Voice: 540-381-9333 FAX: 540-381-8319 www.becpas.com Providing Professional Business Advisory & Consulting Services Douglas L. Johnston, II djohnston@becpas.com

More information

ACCOUNTING COMPETENCY EXAM SAMPLE EXAM. 2. The financial statement or statements that pertain to a stated period of time is (are) the:

ACCOUNTING COMPETENCY EXAM SAMPLE EXAM. 2. The financial statement or statements that pertain to a stated period of time is (are) the: ACCOUNTING COMPETENCY EXAM SAMPLE EXAM 1. The accounting process does not include: a. interpreting d. observing b. reporting e. classifying c. purchasing 2. The financial statement or statements that pertain

More information