2811422520

2811422520 - Chapter 13 Financial Statement Analysis Check...

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Unformatted text preview: Chapter 13 Financial Statement Analysis Check Points (5-10 min.) CP 13-1 Increase (Decrease) (Dollars in thousands) 2005 2004 2005 2004 2003 Amount Percent Amount Percent Revenues $9,889 $9,095 $8,777 $794 8.7% $318 3.6 % Expenses 5,985 5,604 5,194 Net income $3,904 $3,491 $3,583 $413 11.8% $ (92) (2.6)% (5-10 min.) CP 13-2 1. Trend percentages: 2004 2003 2002 2001 2000 Sales…………. 100% 98% 96% 93% 100% Net income….. 104 102 92 82 100 2. 2001 marks the sharpest change in trend for Brandt. Both sales and net income dropped sharply. Chapter 13 Financial Statement Analysis 117 (10-15 min.) CP 13-3 1. Vertical analysis of assets: 20X4 20X3 20X2 Amount Percent Amount Percent Amount Percent Cash $ 6,000 3.3% $ 6,000 3.9% $ 5,000 3.7% Receivables, net 30,000 16.5 22,000 14.3 19,000 14.0 Inventory 48,000 26.4 36,000 23.4 24,000 17.6 Prepaid expenses 2,000 1.1 2,000 1.3 1,000 0.7 Property, plant, and equipment, net 96,000 52.7 88,000 57.1 87,000 64.0 Total assets $182,000 100.0% $154,000 100.0% $136,000 100.0% Inventory, as a percent of total assets, has grown dramatically. This may have caused the cash shortage. 2. To generate more cash, the company can • Buy less merchandise to keep the level of inventory lower. • Mark inventory down in the hope of selling it faster. • Advertise more heavily. Financial Accounting 6/e Solutions Manual 118 (10 min.) CP 13-4 Home Depot Nike (Amounts in millions) Amount Percent Amount Percent Net sales $19,536 100.0 % $9,489 100 .0% Cost of goods sold 14,101 72.2 5,785 61.0 Selling and administrative expenses 3,846 19.7 2,690 28.3 Interest expense 16 0.1 59 0.6 Other expense 38 0.2 34 0.4 Income tax expense 597 3.0 331 3 .5 Net income $ 938 4.8 % $ 590 6 .2% Home Depot earned more net income. Students can argue that Home Depot is more profitable because it earns far more net income than Nike. Nike’s net income was a higher percentage of net sales. The students can argue that Nike is more profitable because it earns a higher percentage of profit on each dollar of sales than Home Depot does. Chapter 13 Financial Statement Analysis 119 (5-10 min.) CP 13-5 (Dollar amounts in millions) 20X6 20X5 20X4 Total current assets = $830 $700 $664 Total current liabilities $259 $223 $245 Current ratio = 3.20 = 3.14 = 2.71 The company’s ability to pay its current liabilities is improving . (5-10 min.) CP 13-6 1. (Dollar amounts in millions) 2003 2002 Cash + $ 192 $ 130 Short-term investments + + $ 15 + $ 27 Receivables, net = + $ 169 + $ 168 Total current liabilities $1,461 $1,520 = 0.26 = 0.21 2. YUM! Brands’ acid-test ratio looks weak both because it is below 1.0 and because it is much lower than the ratios of the other companies....
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2811422520 - Chapter 13 Financial Statement Analysis Check...

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