Fin-Acctg7-SM-Ch13

Fin-Acctg7-SM-Ch13 - Chapter 13 Financial Statement...

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Chapter 13 Financial Statement Analysis Short Exercises (5-10 min.) S 13-1 Increase (Decrease) (Dollars in thousands) 2008 2007 2008 2007 2006 Amount Percent Amount Percent Revenues $10,889 $10,095 $9,777 $794 7.9% $318 3.3 % Expenses 5,985 5,604 5,194 Net income $ 4,904 $ 4,491 $4,583 $413 9.2% $ (92) (2.0)% (5-10 min.) S 13-2 Trend percentages: 2009 2008 2007 2006 Sales…………… 107% 105% 103% 100% Net income……. 130 125 115 100 Chapter 13 Financial Statement Analysis 827
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(10-15 min.) S 13-3 20X4 20X3 20X2 Amount Percent Amount Percent Amount Percent Cash $ 6,000 2.1% $ 6,000 2.7% $ 5,000 2.7% Receivables, net 30,000 10.6 22,000 9.8 19,000 10.2 Inventory 148,000 52.5 106,000 47.3 74,000 39.8 Prepaid expenses 2,000 0.7 2,000 0.9 1,000 0.5 Property, plant, and equipment, net 96,000 34.1 88,000 39.3 87,000 46.8 Total assets $282,000 100.0% $224,000 100.0% $186,000 100.0% Inventory, as a percent of total assets, has grown dramatically. This may have caused the cash shortage. Financial Accounting 7/e Solutions Manual 828
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(10 min.) S 13-4 Porterfield Beasley (Amounts in millions) Amount Percent Amount Percent Net sales $9,489 100.0 % $19,536 100.0 % Cost of goods sold 5,785 61.0 14,101 72.2 Selling and administrative expenses 2,690 28.3 3,846 19.7 Interest expense 59 0.6 16 0.1 Other expense 34 0.4 38 0.2 Income tax expense 331 3.5 597 3.0 Net income $ 590 6.2 % $ 938 4.8 % Beasley earned more net income. Students can argue that Beasley is more profitable because it earns far more net income than Porterfield. Porterfield’s net income was a higher percentage of net sales. The students can argue that Porterfield is more profitable because it earns a higher percentage of profit on each dollar of sales than Beasley does. Chapter 13 Financial Statement Analysis 829
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(5-10 min.) S 13-5 (Dollar amounts in millions) 20X6 20X5 20X4 Total current assets $570 $477 $419 Total current liabilities = $359 $323 $345 Current ratio = 1.59 = 1.48 = 1.21 The company’s ability to pay its current liabilities is improving . (5-10 min.) S 13-6 1. (Dollar amounts in millions) 2006 2005 Cash + $ 319 $ 158 Short-term investments + + $ 6 + $ 43 Receivables, net + $ 220 + $ 236 Total current liabilities = $1,724 $1,623 = 0.32 = 0.27 2. YUM! Brands’ acid-test ratio looks weak both because it is well below 1.0 and because it is much lower than the ratios of the other companies. Financial Accounting 7/e Solutions Manual 830
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S 13-7 (Dollar amounts in millions) Cost of goods sold $2,549 a. Inventory turnover = Average inventory = ($93 + $85) / 2 $2,549 = $89 = 29 times b. Days’ sales in receivables: One day’s $9,561 sales = 365 = $26.2 Average net Days’ sales in receivables $228* receivables = One day’s = $26.2 = 8.7 days sales _____ *($220 + $236) / 2 = $228 These measures look strong . Turning over inventory 29 times per year is fast, and collecting average receivables in only 8.7 days is also very fast. Chapter 13
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This note was uploaded on 10/27/2009 for the course ECON 252 taught by Professor Vincent during the Fall '08 term at St. Thomas.

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Fin-Acctg7-SM-Ch13 - Chapter 13 Financial Statement...

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