12th Edition

ISBN: 9780134486444

Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura

Publisher: PEARSON

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Textbook Question

Chapter 17, Problem P17.36BPGB

Completing a comprehensive financial statement analysis
Learning Objectives 2, 4
3. 2018: Inventory turnover 8.86
In its annual report, XYZ Athletic Supply, Inc. includes the following five-year financial summary:

XYZ ATHlETIC SUPPLY. INC. Five-Year Financial Summary (Partial; adapted)
(Dollar amounts in thousands except per share data)	2018	2017	2016	2015	2014	2013
Net Sales Revenue	$275,000	$ 222,000	$ 199,000	$171,000	$131,000
Net Sales Seles Revenue Increase	24%	12%	16%	31%	17%
Domestic Comparative Store Sales increase	6%	6$	5%	8%	10%
Other Income—Net	2,090	1,780	1,770	1,700	1,310
Cost of Goods Sold	208,725	169,386	154,822	134,235	103,883
Selling and Administrative Expenses	41,280	36,340	31,670	27,450	22,540
Interest:
Interest Expense	(1,070)	(1,370)	(1,330)	(1,100)	(800)
Interest income	140	155	150	230	140
Income Tax Expense	4,420	3,900	3,610	3,390	2,730
Net Income	21,735	12,939	9,488	6,755	2,497
Per Share of Common Stock:
Net income	1.10	0.80	0.70	0.50	0.28
Dividends	0.45	0.43	0.39	0.35	0.31
Financial Position
Current Assets. Excluding Merchandise Inventory	$30,900	$ 27,200	$ 26,800	$24,400	$ 21,800
Merchandise inventory	24,700	22,400	21,600	19,300	17,000	$16,800
Property, Plant, and Equipment, Net	51,600	46,200	40,500	35,000	25,200
Total Assets	107,200	95,800	88,900	78,700	64,000
Current Liabilities	32,600	27,800	28,800	25,600	17,000
Long-term Debt	23,000	21,200	16,800	18,600	12,900
Stockholders' Equity	51,600	46,800	43,300	34,500	34,100
Financial Ratios
Acid-Test Ratio	0.9	1.0	0.9	1.0	1.3
Rate of Return on Total Assets	22.5%	15.5%	12.8%	10.9%	9.9%
Rate of Return on Common Stockholders' Equity	44.2%	28.7%	24.1%	19.4%	18.9%

Requirements
Analyze the company's financial summary for the fiscal years 2014-2018 to decide whether to invest in the common stock of XYZ. Include the following sections in your analysis.

Trend analysis for net sales revenue and net income (use 2014 as the base year).
Profitability analysis.
Evaluation of the ability to sell merchandise inventory.
Evaluation of the ability to pay debts.
Evaluation of dividends.
Should you invest in the common stock of XYZ Athletic Supply, Inc.? Fully explain your final decision

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Chapter 17, Problem P17.35BPGB

Chapter 17, Problem P17.37CT

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(Learning Objective 7: Calculate return on assets) Handley Grocery Corporationreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$50,000$ 2,200$40,000$48,350$ 2,100$39,300Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?

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(Learning Objective 7: Calculate return on assets) Hometown Supply Companyreported the following information in its comparative financial statements for the fiscal yearended January 31, 2018:January 31,2018January 31,2017Net sales....................................Net earnings..............................Average total assets...................$84,000$ 4,200$70,000$82,600$ 4,050$69,450Requirements1. Compute the net profit margin ratio for the years ended January 31, 2018, and 2017. Did itimprove or worsen in 2018?2. Compute asset turnover for the years ended January 31, 2018, and 2017. Did it improve orworsen in 2018?3. Compute return on assets for the years ended January 31, 2018, and 2017. Did it improveor worsen in 2018? Which component—net profit margin ratio or asset turnover—wasmostly responsible for the change in the company’s return on assets?

Chapter 17 Solutions

Horngren's Accounting (12th Edition)

Ch. 17 - Prob. 1QC Ch. 17 - Prob. 2QC Ch. 17 - Prob. 3QC Ch. 17 - Prob. 4QC Ch. 17 - Prob. 5QC Ch. 17 - Prob. 6QC Ch. 17 - Prob. 7QC Ch. 17 - Prob. 8QC Ch. 17 - Prob. 9QC Ch. 17 - Prob. 10QC

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