hhtfa8e_ch13_sm

hhtfa8e_ch13_sm - Chapter 13 Financial Statement Analysis...

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Chapter 13 Financial Statement Analysis Short Exercises (5-10 min.) S 13-1 Increase (Decrease) (Dollars in thousands) 2010 2009 2010 2009 2008 Amount Percent Amount Percent Revenues $10,473 $9,998 $9,111 $475 4.8% $887 9.7 % Expenses 5,822 5,422 5,110 Net income $ 4,651 $ 4,576 $4,001 $75 1.6% $ 575 14.4% (5-10 min.) S 13-2 Trend percentages: 2010 2009 2008 2007 Sales…………… 118% 106% 103% 100% Net income……. 188% 161% 127% 100% Financial Accounting 8/e Solutions Manual 16
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(10-15 min.) S 13-3 2010 2009 2008 Amount Percent Amount Percent Amount Percent Cash $ 7,500 1.5% $ 2,195 0.5% $ 1,990 0.5% Receivables, net 35,000 7.0 21,950 5.0 23,880 6.0 Inventory 260,000 52.0 193,160 44.0 147,260 37.0 Prepaid expenses 10,000 2.0 17,560 4.0 11,940 3.0 Property, plant, and equipment, net 187,500 37 .5 204,135 46 .5 212,930 53 .5 Total assets $500,000 100.0% $439,000 100.0% $398,000 100.0% Inventory, as a percent of total assets, has grown dramatically. Property, plant and equipment appears to be wearing out and is not being replaced due to the growth in inventory which has led to a tight cash position. Financial Accounting 8/e Solutions Manual 17
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(10 min.) S 13-4 Hartigan Pintal (Amounts in millions) Amount Percent Amount Percent Net sales $10,800 100 .0 % $8,752 100 .0 % Cost of goods sold 6,469 59.9 6,065 69.3 Selling and administrative expenses 3,110 28.8 1,698 19.4 Interest expense 54 0.5 35 0.4 Other expense 32 0.3 44 0.5 Income tax expense 432 4 .0 210 2 .4 Net income $ 703 6 .5 % $ 700 8 .0 % Hartigan earned slightly more net income. Students can argue that Hartigan is more profitable because it earns slightly more net income than Pintal. Pintal’s net income was a higher percentage of net sales. The students can argue that Pintal is more profitable because it earns a higher percentage of profit on each dollar of sales than Hartigan does. Chapter 13 Financial Statement Analysis 18
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(5-10 min.) S 13-5 (Dollar amounts in millions) 2010 2009 2008 Total current assets = $550 $445 $435 Total current liabilities $360 $333 $356 Current ratio = 1.53 = 1.34 = 1.22 The company’s ability to pay its current liabilities is improving . (5-10 min.) S 13-6 1. (Dollar amounts in millions) 2010 2009 Cash + $1,203 $ 903 Short-term investments + + $ 7 + $ 84 Receivables, net = + $ 246 + $ 256 Total current liabilities $1,207 $1,141 = 1.21 = 1.09 2. Gagnon’s acid-test ratio looks fairly good both because it is slightly above 1.0 and it is higher than the ratios of the other three companies. Financial Accounting 8/e Solutions Manual 19
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S 13-7 (Dollar amounts in millions) a. Inventory turnover = Cost of goods sold = $2,200 Average inventory ($91 + $81) / 2 = $2,200 = 26 times $86 b. Days’ sales in receivables: One day’s = $9,500 = $26.0 sales 365 Average net Days’ sales in = receivables = $251* = 9.6 days receivables One day’s $26.0 sales _____ *($246 + $256) / 2 = $251 These measures look strong . Turning over inventory 26 times per year is fast, and collecting average receivables in only 9.6 days is also very fast. Chapter 13
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hhtfa8e_ch13_sm - Chapter 13 Financial Statement Analysis...

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