...CHAPTER 3 – ANALYZING FINANCIAL STATEMENTS Questions LG1-LG5 1. Classify each of the following ratios according to a ratio category (liquidity ratio, asset management ratio, debt management ratio, profitability ratio, or market value ratio). a. Current ratio – liquidity ratio b. Inventory turnover ratio – asset management ratio c. Return on assets – profitability ratio d. Accounts payable period – asset management ratio e. Times interest earned – debt management ratio f. Capital intensity ratio – asset management ratio g. Equity multiplier – debt management ratio h. Basic earnings power ratio – profitability ratio LG1 2. For each of the actions listed below, determine what would happen to the current ratio. Assume nothing else on the balance sheet changes and that net working capital is positive. a. Accounts receivable are paid in cash – Current ratio does not change b. Notes payable are paid off with cash – Current ratio increases c. Inventory is sold on account – Current ratio does not change d. Inventory is purchased on account– Current ratio decreases e. Accrued wages and taxes increase – Current ratio decrease f. Long-term debt is paid with cash – Current ratio decreases g. Cash from a short-term bank loan is received – Current ratio decreases LG1-LG5 3. Explain the meaning and significance of the following ratios a. Quick ratio - Inventories are generally the least liquid of a firm’s current assets. Further, inventory is the current...
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...decision makers, it outlines Strong points as well as weak ones. Mission The mission of Primerica is to Help Families Become Properly Protected, Debt Free and Financially Independent. Company summary Primerica is excited about helping people to solve the financial problems of the middle market. Our representatives meet with families in their own homes, across the kitchen table, and teach them “how money works”. These fundamental financial concepts are not taught in school. Primerica believes everyone has a right to know these simple principles – not just the wealthy! While other companies target the affluent, Primerica helps hardworking families all across North America. Through education and by offering a customized financial strategy, our clients are able to take advantage of our common sense solutions and get on the path to financial independence and freedom! Primerica has been in business since 1977, and currently they serve over 6 million clients in the U.S., Canada and Puerto Rico. They have more than 100,000 licensed representatives, and also have more than 26,000 licensed mutual fund representatives. Over $30 billion in assets under management, Placed in force over $80 billion in life insurance in 2009, and $515 million in compensation paid to the sales force in 2009. A...
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...Project One Financial Management FIN-515 Keller Graduate School of Management Prepared for: Professor Cynthia Taylor Prepared by: Abu N Rahman In current online business marketing competition there are two companies competing each eBay and Amazon. That’s why I choose those companies for financial analysis. Considering availability of information analyzing year 2013 Profitability Ratios Gross Margin eBay Amazon. $3081, 000/$4530, 000 $6781, 000/$25587, 000 = 0.68 or 68% 0.2650 or 26.50% Because it shows company retains after incurring the direct costs associated with producing the goods and services sold by a company. Considering that eBay’s gross margin shows they are more efficient than the Amazon. Amazon have larger the cost than the eBay. They sale more than eBay but because of cost their gross profit is less than eBay. If we consider gross margin for an investment it shows eBay is safer than the Amazon for an investment. Operating Margin eBay Amazon. $1022, 000/$4530, 000 $510, 000/$25587, 000 = .2256 or 22.56% 0.0199 or 1.9% After operating margin analysis we can say that eBay has a large proportion of a company's revenue is left over after paying for variable costs of production such as wages, raw materials, etc. in this case company is going to left some portion of revenue after pay for debt, interest...
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...Project One Cody Snodgrass Financial Management FIN-515 Keller Graduate School of Management July 24, 2015 Thanks to technology people can now shop from the comfort of their own homes and purchase virtually anything. This trend has become so profitable that many companies have started to shut down their big chain stores and move to online stores to increase profits and decrease expenses. Amazon is a company that has taken it to new heights in terms of how they perform business. Their prices are low due to the fact that they do not have very much inventory. They work with other companies to help provide them exposure for their business in exchange for lower prices for their products. However a fierce competitor in terms of size and resources not to mention media and other digital information is Google. It has been spending mass amounts of money in order to compete and possibly take down Amazon. Below is a comparison of both the giant corporation’s financial story. The facts and figures in this report are based on the 2014 fiscal year as per the references listed at the end of the report. Profitability Ratios Gross Margin Google Amazon ($66,001,000,000-49,905,000,000) (88,908,000,000-63,880,000,000)/88,908,000,000=%28.15 /66,001,000,000=%24.39 Because it shows company retains after incurring the direct costs associated with producing the goods and services sold by a company. Amazon is more efficient than Google. The numbers are slightly higher on Amazons...
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...The Performance Analysis between Dunkin Donuts and Starbucks FIN-515-66639 Managerial Finance Syed Tariq Ali Anvery Professor Michael Vasilou March 19, 2015 Dunkin' Brands Group, Inc DuPont 2014 Starbucks Corporation DuPont 2014 1. Return on equity= Net income/Equity 1. Return on equity= Net income/Equity 177,468/ 367,959 2,336,400/5,272,000 48% 44.32% 2. Profit margin= Net income/Sales 2. Profit margin= Net income/Sales 177,468 / 748,709 2,336,400/1,644,7800 23.70% 14.20% 3. Asset turnover= Sales/Assets 3. Asset turnover= Sales/Assets 748,709/317,7383 1,6,447,800/1,075,2900 23.56%. 15.23% 4. Financial leverage= Assets/Equity 4. Financial leverage= Assets/Equity 3,1,77,383/367,959 1,075,2900/5,272,000 8.63% 2.04% ROE=23.70*23.56*8.63= 48.75% ROE=14.20*15.23*2.04=44.18% RATIOS Dunkin' Brands Group, Inc DuPont 2014 Starbucks Corporation DuPont 2014 Profitability Ratios Gross Margin Gross profit/ Sales Gross profit/ Sales 613,418/748,709 9,589,000/16,447,800 81.93% 58.39% Gross Margin: Gross margin shows the profitability of the actual products being sold before certain expenses and overhead are taken out. It measures how much higher they are able to price products above the costs to produce those products. Therefore, gross margin shows how much of every sales dollar can then be used in the business...
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...and 2015, cost of goods increased as a percentage of sales in the years under review. However, all the other figures decreased as a percentage of sales between 2014 and 2015 indicating that the figure for sales increased in 2015. ANSWER 3 -29 PART TWO Balance sheet Gross plant and equipment recorded the highest fraction of total assets in the two years under review. This is an indication that this incorporation prioritized investments in plant and equipment for financial stability purposes. Preferred stock recorded the lowest fraction of fixed assets in both 2014 and 2015 indicating that Lake of Egypt Marina Inc. kept the preferred stocks at a low level in order to minimize the preferred claims attributed to this class of stock. | Calculating Ratios | | | | | | | | | | | | | | | | | | | | | | | | ANSWER 3 - 29 PART ONE | | | | | Income Statements | | | Percentages | of sales | | 2015(in millions dollars) | 2014(in millions dollars) | 2015 | 2014 | sales | 515 | 432 | N/A | N/A | cost of goods sold | 230 | 175 | 44.66% | 40.51% | gross profit | 285 | 257 | 55.34% | 59.49% | other operating expenses | 20 | 25 | 3.88% | 5.79% | depreciation | 22 | 20 | 4.27% | 4.63% | interest taxes | 33 | 30 | 6.41% | 6.94% | preferred stock dividends | 5 | 5 | 0.97% | 1.16% | common stock dividends | 65 | 65 | 12.62% | 15.05% | | | | | | ANSWER 3 - 29 PART TWO | | | | | Balance sheets | | | | | | | ...
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...Note to FI 515 Exam 1 |Access dates: | |7/24/2011 12:00:00 AM to 7/31/2011 11:59:59 PM | | | |Can be reviewed in Gradebook on: | |8/2/2011 11:59:59 PM | | | |Number of times can be taken: | |1 | | | |Time allowed to complete: | |2h, ...
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...Centenary College of NJ Explanation of Statement of Cash Flows GAC 515 Professor Frank Longo Sandra Rambert August 7, 2014 Statement of Cash Flows has two main purposes firstly, deliver data about a business’ cash receipts and payments. Secondly, statement of cash flows records changes as a product of operations, investments and financial activities during a period on a cash basis. (Weil, 2014) Information in a statement of cash flows can be useful to investors, creditors and any other interested parties. Individuals or entities reviewing the cash flow statement can determine the optimal time to implement future business strategies, payout dividends and invest money back into the company. Cash flow statement identifies the net income and net cash flows from operating activity. Statement of cash flows is usually prepared using two methods the indirect method and the direct method. “The indirect method also known as reconciliation method starts with net income and converts it to net cash flow from operating activities.” (Explanation, 2011) The indirect method records net income for transactions that relates to net income but not cash. To calculate net cash flow from operating activity charges that are non-cash in the income statement are added back to net income and non –cash credits are deducted from net income. (Weil, 2014) The greatest advantage of the indirect method is it concentrates on the difference between net income and net cash flow from operating...
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...[pic] DeVry FIN 515 Group Project Company analysis as of 12/31/2013 and 12/31/2012 in USD 2012 2013 Profitability Ratios: Gross Margin 48.74 39.12 Operating Margin 11.37 10.21 EBITDA Margin % 13.39 12.21 Calculated Tax Rate % 37.80 30.21 Profit Margin (TTM) 6.96 5.67 Valuation Ratios: Price/Earnings (TTM) 113.38 115.21 Price/Book (TTM) 17.54 18.19 Price/Cash Flow (TTM) 153.19 158.30 Asset Management: Total Asset Turnover 1.71 2.24 Receivables Turnover 12.10 13.21 Inventory Turnover 3.03 4.03 Property Plant & Equip Turnover 11.52 12.71 Cash & Equivalents Turnover 6.77 8.12 Debt Management: Interest Coverage 90.38 90.40 Long Term Debt/Equity 0.05 0.06 Long Term Debt as % of Invested Capital 3.98 3.99 Total Debt/Equity 0.15 0.16 Accounts Payable Turnover 15.09 15.10 Accrued Expenses Turnover 21.32 21.34 Liquidity Indicators: Quick Ratio 1.29 1.34 Current Ratio 2.65 2.70 Net Current Assets as % of Total Assets 44.51 44.55 Free Cash Flow per Share 0.15 0.17 Revenue to Assets 1.48 1.50 Under Armour Inc. Introduction Under Armour, Inc. is an American sports clothing and accessories company. The company is a supplier of the sportswear and casual apparel. Under Armour began to offer footwear in 2006. Under Armour’s global headquarters...
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...To be completed by students (typewritten) MODULE NUMBER | | MODULE TITLE | Managerial Accounting | SEMESTER | Fall 2012/2013 | SESSION | | ASSIGNMENT NUMBER | | SUBMISSION DATE DUE | 13.03.2013 | ASSIGNMENT TITLE | Financial performance evaluation of Henkel | INSTRUCTOR’S NAME | Goran Vasilev | To be completed by the front desk secretary or the course administrator SIGNATURE | DATE SUBMITTED | HOUR SUBMITTED | MATERIAL SUBMITTED | | | | Report Diskette/CD | | To be completed by the instructor SIGNATURE & DATE | MARK * | MARK AFTER ORAL (if applicable) | SUBMISSION | | | | On Time Late | | * fill in the slot in the covered area if blind second marking is required Other comments: STUDENT NAME(s) | Elena Donevska | Declaration: All sentences or passages quoted in this coursework from other people's work have been specifically acknowledged by clear cross referencing to author, work and page(s). I understand that failure to do this amounts to plagiarism and will be considered grounds for failure in this coursework and the module examination as a whole. STUDENT REG. NUMBER(s) | 9654 | To be completed by the 2nd examiner (if applicable) SIGNATURE | MARK | | | AGREED FINAL MARK | | STUDENT SIGNATURE(s) | | To be completed by students (typewritten) MARK | | to be completed by instructors...
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...Happy Flier: A Financial Analysis on Southwest Airlines Thomas J. Baucus FIN 200 12/20/2014 Executive Summary The purpose of this report is an in-depth analysis on the financial position of Southwest Airlines Co. (LUV). As it stands, Southwest Airlines is a big player in the Regional Airline Industry due to the company’s focus on efficiency and consumer support. The company is prepared to handle the conditions cause by the decline in the economic cycle due to a conservative approach. Southwest Airline’s financial statements and ratios indicate a large increase in operations and profitability in the last three years. However, recent financing activities indicate an increase in current liabilities, PPE and a decrease in long-term debt. Analysts are worried that the company’s market price is inflated and are recommending the company less because of this. Despite these worries, Southwest Airlines is projected to be profitable in the upcoming years. This report is organized as so: the title page, the executive summary, the introduction, the current financial climate, financial statement and ratio analysis, short and long-term financing, risk management, and at last, the conclusion. A page containing my references used is available at the end of the report. Introduction Southwest Airlines Co. (LUV) is a leader in the regional airlines industry. Yahoo Finance states that “as of December 31, 2012, the company operated 694 aircraft… (and)... served 97 destinations...
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...COURSE OBJECTIVES Financial and management accounting are more closely linked in practice than one might expect from reading traditional textbooks and the problems to be resolved often have income tax and auditing consequences as well. This seminar is designed to provide you with opportunities to apply general concepts and principles learned in intermediate and advanced financial accounting courses to new economic transactions and business decisions. Cases will be used to permit you to practice the skills you will need as a professional accountant whether in public accounting or private industry. In particular, this course is intended to refine your skills in researching the professional accounting literature to solve particular accounting problems, to arrive at defensible solutions where GAAP is vague or nonexistent, and to present your research conclusions in a professional manner. You will have opportunities to present your work orally and in writing. REQUIRED MATERIALS: A recent Intermediate Accounting text (Kieso used in Acct 315 & 414 would be fine) A recent Advanced Accounting text (whatever was used in for Acct 415-515 would be fine) On-line access to FASB’s ASC (accounting standards codification). The Department has purchase academic license so you can use the $850 “professional” version rather than the free version which has fewer bells and whistles. You can log on from fasb.org but it will take you to http://aaahq.org/ascLogin.cfm where you enter...
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...------------------------------------------------- Financial Analysis TABLE OF CONTENTS EXECUTIVE SUMMARY 3 INTRODUCTION 4 I. Liquidity Ratios 4 A. Working Capital 4 B. Current Ratio 5 C. Acid Test Ratio 5 D. Inventory Turnover Ratio 6 E. Days in Inventory 6 F. Receivables Turnover Ratio 7 G. Average Collection Period 8 II. Solvency Ratios 8 A. Debt to Assets Ratio 8 B. Times Interest Earned 9 III. Profitability 9 A. Earnings Per Share 9 B. Gross Profit Rate 10 C. Profit Margin Ratio 10 D. Return on Assets Ratio 11 E. Asset Turnover Ratio 11 REFERENCES 12 EXECUTIVE SUMMARY The succeeding report provides an analysis and assessment of the current and prospective profitability, liquidity and financial stability of Motorola Solutions. Methods of analysis (which can all be reviewed in the appendices) include a series of financial ratios comprising of Current Ratio, Acid Test Ratio, Inventory Turnover Ratio, Days in Inventory, Receivables Turnover Ratio, Debt to Total Assets Ratio, Times Earned Interest Ratio, Profit Margin Ratio, Return on Assets Ratio, and the Asset Turnover Ratio. Other calculations include Working Capital, Average Collection Period, Earnings per Share, and Gross Profit Rate. This enquiry will not only explore the fiscal performance of Motorola Solutions for the subsequent three years, but will also include a comparison of a principal competitor, Harris Corporation, to further consider Motorola Solution’s current standing in the industry. The objective of this financial analysis...
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...Introduction Accountants have a responsibility to clients, third parties, and to the government. To the clients, accountants have an ethical responsibility to: protect them, provide accurate financial information, represent them with enthusiasm and maintain high ethical standards. Accountants’ responsibilities to third parties consist of the accountant’s duty of care, possessing the necessary skills and acting the good faith. An accountant’s responsibility to the government is to provide accurate information to the public and to the government, they also have the responsibility to follow and obey the laws, regulations, and securities acts. The responsibilities of accountants is tremendous, “The standard of care applicable to the conduct of audits by public accountants is the same as that applied to doctors, lawyers, architects, engineers, and others furnishing skilled services for compensation, and that standard requires reasonable care and competence therein.” (www.USLEAGAL.com). Accountants’ Responsibility to Clients Accountants have certain responsibilities to their clients, some ethical responsibilities are: * Protect our clients. * Produce financial statements and tax returns to the best of our ability after performing a proper due diligence. * Avidly represent our clients with zeal, in the event of audit or other administrative settings, before the Internal Revenue Service, The Illinois Department of Revenue, or other governmental agencies and maintain...
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...Sarbanes-Oxley In Week 1 we studied the general importance of the "rules of the game" (property rights and the rule of law) to a well-functioning economy. This week, we focused in more closely on the "rules of the game" regarding corporate governance and financial reporting. The Week 6 topic of fraudulent financial reporting relates to corporate top management that enriches itself and abandons its obligations to shareholders, employees, creditors, government, and the general public. The Agency Problem Economists call this failure of duty the problem of "agency." Top management is supposed to be the fiduciary (faithful agent) of the shareholders that own the enterprise. But a corrupt agent neglects fiduciary duty to the principal in favor of his/her own selfish interest. Lawyers refer to this same problem as a failure to perform “fiduciary duty” and a "conflict of interest." Ethicists see the problem as deviation from moral conduct. But, whatever terminology is used, the problem remains the same: how can the management agency be kept faithful to its fiduciary duty to the owners, and to the other stakeholders (employees, creditors, government, and the general public)? This is a fundamental and difficult problem. The founders of the United States confronted it in attempting to create a federal government that would be powerful enough to perform its functions, but not so powerful that it would become as oppressive to Americans as the English government the American Revolution...
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