Jecember 31, 20Y2 and 20Y1 20Υ2 20Υ1 Sales... $10,000,000 $9,400,000 4,950,000 $4,450,000 $1,880,000 Cost of goods sold. Gross profit.. Selling expenses. Administrative expenses. Total operating expenses Income from operations Other revenue. 5,350,000 $ 4,650,000 $ 2,000,000 1,500,000 $ 3,500,000 $ 1,150,000 1,410,000 $3,290,000 $1,160,000 150,000 140,000 $ 1,300,000 $1,300,000 Other expense (interest) Income before income tax Income tax expense. 170,000 150,000 $ 1,130,000 $1,150,000 230,000 %$ 900,000 225,000 $ 925,000 Net income Stargel Inc. Comparative Balance Sheet December 31, 20Y2 and 20Y1 20Y2 20Υ1 Assets Current assets: Cash $ 500,000 $ 400,000 1,000,000 Marketable securities. 1,010,000 Accounts receivable (net) 740,000 510,000 Inventories Prepaid expenses Total current assets.. 1,190,000 950,000 250,000 229,000 $3,089,000 $3,690,000 Long-term investments. Property, plant, and equipment (net) Total assets 2,350,000 2,300,000 3,740,000 3,366,000 $9,780,000 $8,755,000 Liabilities Current liabilities... Long-term liabilities: Mortgage note payable, 10%. Bonds payable, 10%... Total long-term liabilities otal liabilities $ 900,000 $ 880,000 $ 200,000 %24 1,500,000 1,500,000 $1,700,000 $1,500,000 $2,600,000 $2,380,000 Stockholders' Equity referred $0.90 stock, $10 par. ommon stock, $5 par etained earnings.... otal stockholders equity. otal liabilities and stockholders' equity. $ 500,000 $ 500,000 500,000 ... 500,000 6,180,000 5,375,000 $7,180,000 $6,375,000 $9,780,000 $8,755,000 artrust!

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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## Financial Statement Analysis

This educational overview covers key financial ratios and metrics used in analyzing financial statements. Students and professionals can use this guide to understand how these metrics provide insight into a company's performance, financial health, and efficiency. 

### Key Ratios and Metrics:

1. **Inventory Turnover**: Measures how many times a company's inventory is sold and replaced over a period.
   
2. **Number of Days' Sales in Inventory**: Indicates the average number of days it takes for inventory to be sold.
   
3. **Ratio of Fixed Assets to Long-term Liabilities**: Assesses the proportion of fixed assets funded by long-term liabilities.
   
4. **Ratio of Liabilities to Stockholders' Equity**: Reflects the relationship between the funds provided by creditors versus those provided by owners.
   
5. **Times Interest Earned**: Shows the ability to meet interest payments, calculated as earnings before interest and taxes divided by interest expense.
   
6. **Asset Turnover**: Efficiency ratio showing how well a company uses its assets to generate sales revenue.
   
7. **Return on Total Assets**: Indicates how effectively a company is using its assets to generate profit.
   
8. **Return on Stockholders' Equity**: Measures the return generated on the owners' investment in the company.
   
9. **Return on Common Stockholders' Equity**: Focuses specifically on the return generated for common shareholders.
   
10. **Earnings per Share on Common Stock**: Indicates the portion of a company's profit allocated to each outstanding share of common stock.
   
11. **Price-Earnings Ratio**: Valuates a company’s current share price compared to its per-share earnings.
   
12. **Dividends per Share of Common Stock**: Displays the amount of cash returned to shareholders per share, indicating a company's profitability and dividend policy.
   
13. **Dividend Yield**: Measures the dividend income relative to the market value per share, offering insight into the income generated from an investment in shares.

### Charts and Diagrams:

- **Data Entry Blocks**: On the right, there are fields corresponding to each metric. These blocks are meant for users to input data from a company’s financial reports to facilitate calculations and analysis.

Through mastering these metrics and ratios, individuals can enhance their ability to evaluate financial statements and make informed investment or managerial decisions.
Transcribed Image Text:## Financial Statement Analysis This educational overview covers key financial ratios and metrics used in analyzing financial statements. Students and professionals can use this guide to understand how these metrics provide insight into a company's performance, financial health, and efficiency. ### Key Ratios and Metrics: 1. **Inventory Turnover**: Measures how many times a company's inventory is sold and replaced over a period. 2. **Number of Days' Sales in Inventory**: Indicates the average number of days it takes for inventory to be sold. 3. **Ratio of Fixed Assets to Long-term Liabilities**: Assesses the proportion of fixed assets funded by long-term liabilities. 4. **Ratio of Liabilities to Stockholders' Equity**: Reflects the relationship between the funds provided by creditors versus those provided by owners. 5. **Times Interest Earned**: Shows the ability to meet interest payments, calculated as earnings before interest and taxes divided by interest expense. 6. **Asset Turnover**: Efficiency ratio showing how well a company uses its assets to generate sales revenue. 7. **Return on Total Assets**: Indicates how effectively a company is using its assets to generate profit. 8. **Return on Stockholders' Equity**: Measures the return generated on the owners' investment in the company. 9. **Return on Common Stockholders' Equity**: Focuses specifically on the return generated for common shareholders. 10. **Earnings per Share on Common Stock**: Indicates the portion of a company's profit allocated to each outstanding share of common stock. 11. **Price-Earnings Ratio**: Valuates a company’s current share price compared to its per-share earnings. 12. **Dividends per Share of Common Stock**: Displays the amount of cash returned to shareholders per share, indicating a company's profitability and dividend policy. 13. **Dividend Yield**: Measures the dividend income relative to the market value per share, offering insight into the income generated from an investment in shares. ### Charts and Diagrams: - **Data Entry Blocks**: On the right, there are fields corresponding to each metric. These blocks are meant for users to input data from a company’s financial reports to facilitate calculations and analysis. Through mastering these metrics and ratios, individuals can enhance their ability to evaluate financial statements and make informed investment or managerial decisions.
**Stargel Inc. Financial Overview for Educational Purposes**

### Comparative Retained Earnings Statement
**For the Years Ended December 31, 2012 and 2011**

- **Retained Earnings, January 1:**
  - 2012: $5,375,000
  - 2011: $4,545,000

- **Net Income:**
  - 2012: $1,130,000
  - 2011: $925,000

- **Dividends:**
  - Preferred Stock Dividends:
    - 2012: $5,000
    - 2011: $5,000
  - Common Stock Dividends:
    - 2012: $90,000
    - 2011: $95,000
  - Total Dividends:
    - 2012: $95,000
    - 2011: $100,000

- **Retained Earnings, December 31:**
  - 2012: $6,410,000
  - 2011: $5,370,000

---

### Comparative Income Statement
**For the Years Ended December 31, 2012 and 2011**

- **Sales:**
  - 2012: $10,000,000
  - 2011: $9,400,000

- **Cost of Goods Sold:**
  - 2012: $5,350,000
  - 2011: $4,950,000

- **Gross Profit:**
  - 2012: $4,650,000
  - 2011: $4,450,000

- **Selling Expenses:**
  - 2012: $1,350,000
  - 2011: $1,320,000

- **Administrative Expenses:**
  - 2012: $1,800,000
  - 2011: $1,700,000

- **Total Operating Expenses:**
  - 2012: $3,150,000
  - 2011: $3,020,000

- **Operating Income:**
  - 2012: $1,500,000
  - 2011: $1,430,000

- **Other Revenue (Expenses):**
  - Other Expense
Transcribed Image Text:**Stargel Inc. Financial Overview for Educational Purposes** ### Comparative Retained Earnings Statement **For the Years Ended December 31, 2012 and 2011** - **Retained Earnings, January 1:** - 2012: $5,375,000 - 2011: $4,545,000 - **Net Income:** - 2012: $1,130,000 - 2011: $925,000 - **Dividends:** - Preferred Stock Dividends: - 2012: $5,000 - 2011: $5,000 - Common Stock Dividends: - 2012: $90,000 - 2011: $95,000 - Total Dividends: - 2012: $95,000 - 2011: $100,000 - **Retained Earnings, December 31:** - 2012: $6,410,000 - 2011: $5,370,000 --- ### Comparative Income Statement **For the Years Ended December 31, 2012 and 2011** - **Sales:** - 2012: $10,000,000 - 2011: $9,400,000 - **Cost of Goods Sold:** - 2012: $5,350,000 - 2011: $4,950,000 - **Gross Profit:** - 2012: $4,650,000 - 2011: $4,450,000 - **Selling Expenses:** - 2012: $1,350,000 - 2011: $1,320,000 - **Administrative Expenses:** - 2012: $1,800,000 - 2011: $1,700,000 - **Total Operating Expenses:** - 2012: $3,150,000 - 2011: $3,020,000 - **Operating Income:** - 2012: $1,500,000 - 2011: $1,430,000 - **Other Revenue (Expenses):** - Other Expense
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