CH 18

FINANCIAL STATEMENT ANALYSIS

Lecture 25, 26

Mata kuliah : F0024 – Pengantar Akuntansi IITahun : 2010

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QUESTIONS

3. Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods.

6. Name the major ratios useful in assessing:a. Liquidityb. Solvency

QUESTIONS

8. What do the following classes of ratios measure?a. Liquidity ratiosb. Profitability ratiosc. Solvency ratios

9. What is the difference between the current ratio and the acid-test ratio?

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E18-3The comparative condensed balance sheets of Conard Corporation are presented below.

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CONARD CORPORATIONComparative Condensed Balance Sheets

December 312011 2010

Assets Current Assets $ 74,000 80,000 Property, plant, and equipment net

99,000 90,000

Intangibles 27,000 40,000Total Assets 200,000 210,000

E18-3

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CONARD CORPORATIONComparative Condensed Balance Sheets

December 312011 2010

Liabilities and stockholders’ equity Current liabilities 42,000 48,000 Long-term liabilities 143,000 150,000 Stockholders’ equity 15,000 12,000Total liabilities and stockholders’ equity

200,000 210,000

E18-3

Instructions:a.Prepare a horizontal analysis of the balance

sheet data for Conard Corporation using 2010 as a base.

b.Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for 2011.

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P18-2The comparative statement of Villa Tool Company are presented below.

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VILLA TOOL COMPANYIncome Statement

For the Year Ended December 312011 2010

Net sales $ 1,818,500

1,750,500

Cost of Goods Sold 1,011,500 996,000Gross Profit 807,000 754,500Selling administrative expense 516,000 479,000Income from operations 291,000 275,500

P18-2

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VILLA TOOL COMPANYIncome Statement

For the Year Ended December 312011 2010

Income from operations 291,000 275,500Other expenses and losses interest expense

18,000 14,000

Income before income taxes 273,000 261,500Income tax expense 81,000 77,000Net Income 192,000 184,500

P18-2

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VILLA TOOL COMPANYBalance SheetsDecember 31

2011 2010Assets Current assets Cash $ 60,100 64,200 Short-term investments 69,000 50,000 Accounts receivable (net) 117,800 102,800 Inventory 123,000 115,500 Total current assets 369,900 332,500

P18-2

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VILLA TOOL COMPANYBalance SheetsDecember 31

2011 2010 Total current assets 369,900 332,500 Plant assets (net) 600,300 520,300Total assets 970,200 852,800

P18-2

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VILLA TOOL COMPANYBalance SheetsDecember 31

2011 2010Liabilities & stockholders’ equityCurrent liabilities Account payable 160,000 145,400 Income taxes payable 43,500 42,000 Total current liabilities 203,500 187,400Bonds Payable 200,000 200,000 Total liabilities 403,500 387,400

P18-2

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VILLA TOOL COMPANYBalance SheetsDecember 31

2011 2010 Total liabilities 403,500 387,400Stockholders’ equity Common stock ($5 par) 280,000 300,000 Retained earnings 286,700 165,400 Total stockholders’ equity 566,700 465,400Total liabilities and stockholders’ equity

970,200 852,800

P18-2All sales were on account. The allowance for doubtful accounts $3,200 on December 31, 2011 and $3,000 on December 31, 2010.

Instructions:Compute the following ratios for 2011. (Weighted average common shares in 2011 were 57,000)a.Earnings per shareb.Return on common stockholders’ equity.c.Return on assetsd.Current

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P18-2

e. Acid-testf. Receivables turnoverg. Inventory turnoverh. Times interest earnedi. Assets turnoverj. Debt to total assets.

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