Chapter 4, Problem 2AAIC

1. In financial statement analysis, what is the basic objective of observing trends in data and ratios? 2. Distinguish between trend percentages and component percentages. Which would be better suited for analyzing the change in sales over a term of several years?3. What is the quick ratio? Under what circumstances are short-term creditors most likely to regard a company’s quick ratio as more meaningful than its current ratio?4. Identify the ratios or other analytical tools used to evaluate profitability. Explain briefly how each is computed.5. Net sales of Major General Store have been increasing at a reasonable rate, but net income has been declining steadily as a percentage of these sales. What appears to be the problem?6. Why might earnings per share be more significant to a shareholder in a large corporation than the total amount of net income?7. ABC Co. has a current ratio of 3 to 1. Ono Corp. has a current ratio of 2 to 1. Does this mean that ABC’s operating cycle is longer than…

Addai Company has provided the following comparative information:       You have been asked to evaluate the historical performance of the company over the last five years. Selected industry ratios have remained relatively steady at the following levels for the last five years:2010-2014Rate earned on total assets ........28%Rate earned on stockholders' equity .....18%Number of times interest charges are earned. 2.7Ratio of liabilities to stockholders' equity... 0.4Instructions1. Prepare four line graphs with the ratio on the vertical axis and the years on the horizontal axis for the following four ratios (rounded to one decimal place):a. Rate earned on total assetsb. Rate earned on stockholders' equityc. Number of times interest charges are earnedd. Ratio of liabilities to stockholders' equityDisplay both the company ratio and the industry benchmark on each graph. That is, each graph should have two lines.2. Prepare an analysis of the graphs in(1).

1. In FS analysis what is the basic objective of observing trends in data and ratios?   2. Distinguish between trend percentages and component percentages. Which would be better suited for analyzing the change in sales over a term of several years?   3. Net Sales of Premiere Gen. Store have been increasing at a reasonable rate but net income has been declining steadily as percentage of these sales? What appears to be the problem?   4. Under what circumstances would you consider a corporate net income P1million as being unreasonably LOW? HIGH? 1. What is the basic purpose for examining trends in a company's financial ratios and other data? 2. Why does an analyst compute financial ratios rather than simply studying raw financial data? 3. What is meant by financial leverage? 4. A company seeking a line of credit at a bank was turned down. The bank stated that the company's current ratio of 2:1 is not adequate. Can you give reasons why a 2:1 current ratio might not be adequate? 5. Why at…

a. what are the debt to equity ratios at the beginning and the end of the 2018 fiscal business year? Has the ratio improved?  If so, by how much? b. the restaurant has last cash at the end of the year than it had at the beginning, is that a bad thing? explain.

Certain financial ratios for The Gap for its most recent year are given below, along with the average ratios for its industry.  Based on those ratios, answer the following.  1) Does The Gap seem to prefer to finance its assets with debt or with equity?  How can you tell?  What percent of its assets are funded with debt?  What percent  of its assets are funded with equity?  2) A supplier to The Gap sells merchandise to The Gap and asks to be paid within 60 days.  While any of The Gap’s financial ratios might be of interest to the supplier, which of the ratios listed below do you think would likely be the most important one to the supplier?  Why?  3) Which of the ratios presented suggest that, compared to its industry, The Gap may have a problem controlling its operating expenses?  How can you tell?  Your answer should clearly indicate that you understand why the ratio that you chose answers this question.  Here is the data for The Gap and its industry. Financial Ratios…

Relation between Current Ration and Quick Ration. A firm has experienced a decrease in its current ratio but an increase in its quick ratio during last three years. What is the likely explanation for these results?

Juroe Company provided the following income statement for last year: Juroes balance sheet as of December 31 last year showed total liabilities of 10,250,000, total equity of 6,150,000, and total assets of 16,400,000. Required: 1. Calculate the return on sales. (Note: Round the percent to two decimal places.) 2. CONCEPTUAL CONNECTION Briefly explain the meaning of the return on sales ratio, and comment on whether Juroes return on sales ratio appears appropriate.

Suppose the company has to revise its estimates because of a downturn in the economy. Unit sales for August, September, and October will be half (50%) of the original estimates. Revise the estimates in cells 1311 through 1313. After this is done, check your forecasted balance sheet. It should still balance! What effect will this new state of affairs have on net income and borrowing? Explain why these items changed.

What do the following data, taken from a comparative balance sheet, indicate about the companys ability to borrow additional long-term debt in the current year as compared to the preceding year?