Question 1

The income statements for MGM Manufacturing Inc. are provided for two recent years:  Instructions 
a) Using the above information to prepare a vertical analysis for MGM.
a), identify the reason for MGM's decreasing profit at the same time that revenue is increasing.
b) Using the analysis completed in part

Accepted Answer

The answer of The income statements for MGM Manufacturing Inc....

Question 2

Comparative information taken from the London Antiques Corporation financial statements is shown below: $\begin{array}{lcc}
&2022 & 2021\\hline
\text{1. Notes receivable}&\$ 80,000 & \$-0- \
\text{2. Accounts receivable}&182,000 & 140,000 \
\text{3. Retained earnings}&49,000 & (40,000) \
\text{4. Sales}&930,000 & 750,000 \
\text{5. Operating expenses}&170,000 & 200,000 \
\text{6. Incometaxes payable}&95,000 & 70,000
\end{array}$ Instructions
Using horizontal analysis, show the percentage change from 2021 to 2022 with 2021 as the base year.

Accepted Answer

The answer of Comparative information taken from the London Antiques...

Question 3

The following items were taken from the financial statements of Mike Inc., over a five-year period: $$\begin{array} { c c c c c c } 
\text { Item } & 2022 & 2021 & 2020 & 2019 & 22018 \
\text { Net Sales } & \$ 980,000 & \$ 900,000 & \$ 650,000 & \$ 550,000 & \$ 500,000 \
\text { Cost of Goods Sold } & 700,000 & 640,000 & 480,000 & 420,000 & 400,000 \
\text { Gross Profit } & \$ 280,000 & \$ 260,000 & \$ 170,000 & \$ 130,000 & \$ 100,000
\end{array}$$ Instructions
Using horizontal analysis and 2018 as the base year, calculate the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favourable or unfavourable for each item.

Accepted Answer

The answer of The following items were taken from the...

Question 4

The following are income statements of two companies that are both in the fast food industry. All amounts are in 000's and are for the year ended December 31, 2021.  Instructions
Using vertical analysis determine which corporation is the more profitable and identify the most significant cause of the difference.

Accepted Answer

The answer of The following are income statements of two...

Question 5

Selected information from the comparative financial statements of Montero Corporation for the year ended December 31, appears below:  Instructions
Answer the following questions relating to the year ended December 31, 2021. Show calculations. 
a) The inventory turnover for 2021 is ______.
b) The interest coverage in 2021 is ______.
c) The debt to total assets for 2021 is ______.
d) The receivables turnover for 2021 is ______.
e) The return on assets for 2021 is ______.

Accepted Answer

The answer of Selected information from the comparative financial statements...

Question 6

Below is the partial balance sheet for Gabi Gold Limited: $\begin{array}{lcc}
&\text { December } 31,2021 & \text { December } 31,2020 \
\text{Accounts Receivable.....................}&\$ 110,000 & \$ 140,000 \
\text{Inventory......................................}&80,000 & 95,000 \
\text{Total Assets..................................}&335,000 & 376,000
\end{array}$ Instructions
Using the items from the comparative balance sheet of Gabi Gold Limited, illustrate horizontal and vertical analysis. Discuss the results of each type of analysis.

Accepted Answer

The answer of Below is the partial balance sheet for...

Question 7

The CEO and CFO of a publicly traded company must ensure and personally declare that the reported financial information is

Accepted Answer

The CEO and CFO of a publicly traded company must ensure and personally declare that the reported financial information is accurate, relevant, and understandable.

Question 8

The 2021 income statements for two different companies are provided below:  Instructions 
a) Are the two companies in the same or different industries? Use vertical analysis to support your answer.
a).
b) Can vertical analysis be used to compare the profitability of the two companies that are in different industries to each other? Support your answer with examples based on your calculations in part

Accepted Answer

The answer of The 2021 income statements for two different...

Question 9

The following data are taken from the financial statements of Stuffy Limited: $\begin{array}{lll}
&2021&2020\
\text { Monthly aver age accounts receivable } & \$ 520,000 & \$ 550,000 \
\text { Net sales on account } & 5,980,000 & 4,950,000
\end{array}$ Terms for all sales are n/30
Instructions 
a) Calculate the receivables turnover and the collection period for both years.
b) What conclusion can an analyst draw about the management of the accounts receivable?

Accepted Answer

The answer of The following data are taken from the...

Question 10

Instructions
a) Does horizontal analysis provide a useful tool to compare the above companies? Explain your answer using an example to demonstrate how it is useful or not useful.
b) Suggest a ratio that could be used as an alternative to evaluate the profitability of the two companies and calculate the ratio. Compare the companies' profitability based on your calculations.

Accepted Answer

The answer of Instructions
a) Does horizontal analysis provide a useful...

Question 11

The balance sheets of two competing companies in the same industry are provided below. The companies have approximately the same volume of sales and similar operating capacities.  Instructions 
a) Calculate the debt to total assets ratio for both companies. Which company is more solvent?
b) Based on the information provided, can horizontal analysis be used to determine which company is more profitable?

Accepted Answer

The answer of The balance sheets of two competing companies...

Question 12

The comparative balance sheet of Alto Communications Corporation appears below:  Instructions 
a) Using horizontal analysis, show the percentage change for each balance sheet item using 2020 as a base year.
b) Using vertical analysis, prepare a common size comparative balance sheet.
c) Comment on your analysis.

Accepted Answer

The answer of The comparative balance sheet of Alto Communications...

Question 13

The income statements for the first three years of operations of Carol's Music Ltd. are provided below:  Instructions 
a) Is Carol's gross profit improving over the three years or not? Use horizontal analysis, with 2020 as the base year, to support your answer.
b) Provide one explanation for the decline in income from operations other than changes in gross profit. Support your answer using vertical analysis.
c) Although profit is decreasing, Carol has not been concerned because her cash flows have increased from year to year. Using the information available in the income statements, explain why this is so.

Accepted Answer

The answer of The income statements for the first three...

Question 14

The total revenue figures for Dabous & Sons Construction Company are as follows: $$\begin{array} { | c | c | c | c | c | c | } 
\hline & 2022 & 2021 & 2020 & 2019 & 2018 \
\hline \text { Revenue } & \$ 19,690 & \$ 10,350 & \$ 9,692 & \$ 9,984 & \$ 9,496 \
\hline
\end{array}$$ Instructions 
a) Using horizontal analysis, calculate the percentage of change from the base year amount, assuming 2018 is the base year.
b) Using horizontal analysis, calculate the percentage change for each year.

Accepted Answer

The answer of The total revenue figures for Dabous &...

Question 15

Susa Corporation had the following comparative current assets and current liabilities:  Instructions
Calculate the following liquidity measures for 2021: 
a) Current ratio
b) Acid-test ratio
c) Receivables turnover
d) Inventory turnover

Accepted Answer

The answer of Susa Corporation had the following comparative current...

Question 16

Cook Corporation had a profit of $ 3,500,000 in 2020. Using 2020 as the base year, profit decreased by 45% in 2021 and increased by 180% in 2022.
Instructions
Calculate the profit reported by Cook Corporation for 2021 and 2022.

Accepted Answer

The answer of Cook Corporation had a profit of $...

Question 17

The financial statements of Diana Dining Inc. appear below:  Additional information:

Accepted Answer

The answer of The financial statements of Diana Dining Inc....

Question 18

Selected information from the comparative financial statements of Patrick Parker Inc. for the year ended December 31, appears below:  Instructions
Answer the following questions relating to the year ended December 31, 2021. Show calculations. 
a) The inventory turnover for 2021 is ______.
b) The interest coverage in 2021 is ______.
c) The debt to total assets for 2021 is ______.
d) The receivables turnover for 2021 is ______.
e) The return on assets for 2021 is ______.

Accepted Answer

The answer of Selected information from the comparative financial statements...

Question 19

Which of the following is NOT considered an economic measure that could have a significant impact on a company's performance?

Accepted Answer

Natural disasters are not an economic measure; they are environmental events that can impact a company's performance but are not considered an economic measure like supply and demand, unemployment, or interest rates.

Question 20

The balance sheets of two competing companies in the same industry are provided below. The companies have approximately the same volume of sales and similar operating capacities.  Instructions 
a) Calculate the debt to total assets ratio for both companies. Which company is more solvent?
b) Based on the information provided, can horizontal analysis be used to determine which company is more profitable?

Accepted Answer

The answer of The balance sheets of two competing companies...

Quiz 10: Financial Statement Analysis

The CEO and CFO of a publicly traded company must ensure and personally declare that the reported financial information is

Susa Corporation had the following comparative current assets and current liabilities: Instructions Calculate the following liquidity measures for 2021: a) Current ratio b) Acid-test ratio c) Receivables turnover d) Inventory turnover

Cook Corporation had a profit of $ 3,500,000 in 2020. Using 2020 as the base year, profit decreased by 45% in 2021 and increased by 180% in 2022. Instructions Calculate the profit reported by Cook Corporation for 2021 and 2022.

The financial statements of Diana Dining Inc. appear below: Additional information:

Which of the following is NOT considered an economic measure that could have a significant impact on a company's performance?