Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 10, Problem 37EB
To determine
Prepare horizontal analysis of income statement for the years ended January 31, 2009 and February 28, 2008 and interpret the analysis.
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Below are the two basic financial statements of Chiz Trading Company. You are tasked to prepare an analysis using Horizontal and Vertical Analysis of their two-dated financial statements. In addition to this you have been tasked to prepare financial ratios measuring the company’s:
Liquidity Status
Current Ratios
Quick Asset Ratios
Efficiency Status
Asset Turnover
Fixed Asset Turnover
Inventory Turnover
Days in Inventory
Accounts Receivable Turnover
Days in Receivable
Profitability Status:
Gross Profit margin Ratio
Operating Income Ratio
Net Profit Ratio
Return on Assets
Return on Equity
Compute the following profitability ratios of the company for the
most recent two years, show all values in the computations:
1.Asset Turnover
2.Profit margin ratio(Net Income/Net Sales)
3.Return on total assets (Net Income/Average Total Assets)
4.Return on stockholders’ equity
5.Basic Earnings per share (EPS)
Based on the results above, what conclusions can you make about the company’s overall profitability and efficient use of assets?
You are provided with the Income Statement and the Balance Sheet of HTS software, Inc. for 2011.
Required:
(b) Analyze the current financial position for the company from a time series and cross section viewpoint.
(c) Break your analysis into an evaluation of the firm’s liquidity, activity, debt, profitability and market ratios.
Historical and Industry Average Ratios
HTS Software , Inc.
Ratio
2010
2011
Industry2011
Current Ratio
2.6
2.08
2.7
Quick Ratio
1.8
1.32
1.75
Inventory Turnover
4.5
6
4.7
Average Collection Period
40days
9.125
42 days
Total Asset Turnover
1.2
1.69
1
Debt Ratio
20%
28.2%
21%
Times Interest Earned
9
5.9%
8.9
Gross Profit Margin
43%
42.8%
44%
Operating Profit Margin
30%
25.5%
32%
Net Profit Margin
20%
17%
21%
Return on total assets
12%
4.11%
13%
Return on Equity
Price/Earnings Ratio
15%
7.3
19%
4.4
16%
8…
Chapter 10 Solutions
Financial Accounting
Ch. 10 - Prob. 1YTCh. 10 - Prob. 2YTCh. 10 - Prob. 3YTCh. 10 - Prob. 4YTCh. 10 - Prob. 5YTCh. 10 - Define the items that the Financial Accounting...Ch. 10 - Prob. 2QCh. 10 - Prob. 3QCh. 10 - Prob. 4QCh. 10 - Prob. 5Q
Ch. 10 - Prob. 6QCh. 10 - What is solvency? Which ratios are useful for...Ch. 10 - What is profitability? Which ratios are useful for...Ch. 10 - What are market indicators? Which ratios are...Ch. 10 - Prob. 10QCh. 10 - Prob. 1MCQCh. 10 - Current assets for Kearney Company are 120,000 and...Ch. 10 - Prob. 3MCQCh. 10 - Prob. 4MCQCh. 10 - Prob. 5MCQCh. 10 - Prob. 6MCQCh. 10 - Prob. 7MCQCh. 10 - Prob. 8MCQCh. 10 - Prob. 9MCQCh. 10 - Prob. 10MCQCh. 10 - Prob. 1SEACh. 10 - Prob. 2SEACh. 10 - Prob. 3SEACh. 10 - Prob. 4SEACh. 10 - Prob. 5SEACh. 10 - A five-year comparative analysis of Low Light...Ch. 10 - Prob. 7SEACh. 10 - Prob. 8SEBCh. 10 - Prob. 9SEBCh. 10 - Prob. 10SEBCh. 10 - Perform a vertical analysis on the following...Ch. 10 - Prob. 12SEBCh. 10 - Prob. 13SEBCh. 10 - Use the following information to construct a...Ch. 10 - Prob. 16EACh. 10 - Prob. 17EACh. 10 - Prob. 18EACh. 10 - Prob. 19EACh. 10 - Use the balance sheets from Suzannes Hotels in...Ch. 10 - Prob. 21EACh. 10 - Prob. 22EACh. 10 - Prob. 23EACh. 10 - Use the statements of earnings for Campbell Soup...Ch. 10 - Prob. 25EACh. 10 - Prob. 26EACh. 10 - Prob. 27EACh. 10 - Prob. 28EBCh. 10 - Prob. 29EBCh. 10 - Prob. 30EBCh. 10 - Prob. 31EBCh. 10 - Prob. 32EBCh. 10 - Prob. 33EBCh. 10 - Prob. 34EBCh. 10 - Prob. 35EBCh. 10 - Prob. 36EBCh. 10 - Prob. 37EBCh. 10 - Prob. 38EBCh. 10 - Prob. 39EBCh. 10 - Prob. 40EBCh. 10 - Prob. 41PACh. 10 - Prob. 42PACh. 10 - Prob. 43PACh. 10 - Following are the income statements for Alpha...Ch. 10 - Prob. 45PACh. 10 - Prob. 46PACh. 10 - Prob. 47PACh. 10 - You are interested in investing in Teddy Company,...Ch. 10 - Prob. 49PBCh. 10 - Prob. 50PBCh. 10 - Prob. 51PBCh. 10 - Prob. 52PBCh. 10 - Prob. 53PBCh. 10 - Prob. 54PBCh. 10 - Prob. 55PBCh. 10 - Prob. 56PBCh. 10 - Prob. 1CTPCh. 10 - Prob. 2CTP
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