1. Prepare comparative income statements showing the percent increase or decrease for the current year in comparison to the prior year. 2. Prepare common-size comparative balance sheets for both years. 3. Compute the following ratios for the current year and identify each one's building block category for financial statement analysis. a. Current ratio g. Debt-to-equity ratio h. Times interest earned i. Profit margin ratio j. Total asset turnover k. Return on total assets I. Return on common stockholders' equity b. Acid-test ratio Accpunts receivable turnover d. Days' sales uncollected e. Inventory turnover c. f. Debt ratio PRECISION COMPANY Comparative Income Statements For Years Ended December 31 Current Yr Prlor Yr Sales ..... $2,486,000 $2,075,000 Cost of goods sold ... Gross profit.... 1,523,000 1,222,000 963,000 853,000 Operating expenses Advertising expense.. Sales salarles expense.. 145,000 100,000 240,000 280,000 Office salarles expense. 165,000 200,000 Insurance expense. 100,000 45,000 Supplles expense.. 26,000 35,000 Depreciation expense 85,000 75,000 Miscellaneous expenses 17,000 15,000 Total operating expenses 778,000 750,000 Operating Income.. 185,000 103,000 Interest expense.. Income before taxes... Income tax expense . Net Income ..... 44,000 46,000 141,000 57,000 47,000 19,000 $ 38,000 $ 94,000 Earnings per share.... 2$ $ 0.99 0.40
1. Prepare comparative income statements showing the percent increase or decrease for the current year in comparison to the prior year. 2. Prepare common-size comparative balance sheets for both years. 3. Compute the following ratios for the current year and identify each one's building block category for financial statement analysis. a. Current ratio g. Debt-to-equity ratio h. Times interest earned i. Profit margin ratio j. Total asset turnover k. Return on total assets I. Return on common stockholders' equity b. Acid-test ratio Accpunts receivable turnover d. Days' sales uncollected e. Inventory turnover c. f. Debt ratio PRECISION COMPANY Comparative Income Statements For Years Ended December 31 Current Yr Prlor Yr Sales ..... $2,486,000 $2,075,000 Cost of goods sold ... Gross profit.... 1,523,000 1,222,000 963,000 853,000 Operating expenses Advertising expense.. Sales salarles expense.. 145,000 100,000 240,000 280,000 Office salarles expense. 165,000 200,000 Insurance expense. 100,000 45,000 Supplles expense.. 26,000 35,000 Depreciation expense 85,000 75,000 Miscellaneous expenses 17,000 15,000 Total operating expenses 778,000 750,000 Operating Income.. 185,000 103,000 Interest expense.. Income before taxes... Income tax expense . Net Income ..... 44,000 46,000 141,000 57,000 47,000 19,000 $ 38,000 $ 94,000 Earnings per share.... 2$ $ 0.99 0.40
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter16: Financial Statement Analysis
Section: Chapter Questions
Problem 4PB
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Use the following financial statements of Precision Co. to complete these requirements.
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