Horngren's Accounting (12th Edition)
12th Edition
ISBN: 9780134486444
Author: Tracie L. Miller-Nobles, Brenda L. Mattison, Ella Mae Matsumura
Publisher: PEARSON
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Textbook Question
Chapter 17, Problem P17.36BPGB
Completing a comprehensive financial statement analysis
Learning Objectives 2, 4
3. 2018: Inventory turnover 8.86
In its annual report, XYZ Athletic Supply, Inc. includes the following five-year financial summary:
| XYZ ATHlETIC SUPPLY. INC. Five-Year Financial Summary (Partial; adapted) |
||||||
| (Dollar amounts in thousands except per share data) | 2018 | 2017 | 2016 | 2015 | 2014 | 2013 |
| Net Sales Revenue | $275,000 | $ 222,000 | $ 199,000 | $171,000 | $131,000 | |
| Net Sales Seles Revenue Increase | 24% | 12% | 16% | 31% | 17% | |
| Domestic Comparative Store Sales increase | 6% | 6$ | 5% | 8% | 10% | |
| Other Income—Net | 2,090 | 1,780 | 1,770 | 1,700 | 1,310 | |
| Cost of Goods Sold | 208,725 | 169,386 | 154,822 | 134,235 | 103,883 | |
| Selling and Administrative Expenses | 41,280 | 36,340 | 31,670 | 27,450 | 22,540 | |
| Interest: | ||||||
| Interest Expense | (1,070) | (1,370) | (1,330) | (1,100) | (800) | |
| Interest income | 140 | 155 | 150 | 230 | 140 | |
| Income Tax Expense | 4,420 | 3,900 | 3,610 | 3,390 | 2,730 | |
| Net Income | 21,735 | 12,939 | 9,488 | 6,755 | 2,497 | |
| Per Share of Common Stock: | ||||||
| Net income | 1.10 | 0.80 | 0.70 | 0.50 | 0.28 | |
| Dividends | 0.45 | 0.43 | 0.39 | 0.35 | 0.31 | |
| Financial Position | ||||||
| Current Assets. Excluding Merchandise Inventory | $30,900 | $ 27,200 | $ 26,800 | $24,400 | $ 21,800 | |
| Merchandise inventory | 24,700 | 22,400 | 21,600 | 19,300 | 17,000 | $16,800 |
| Property, Plant, and Equipment, Net | 51,600 | 46,200 | 40,500 | 35,000 | 25,200 | |
| Total Assets | 107,200 | 95,800 | 88,900 | 78,700 | 64,000 | |
| Current Liabilities | 32,600 | 27,800 | 28,800 | 25,600 | 17,000 | |
| Long-term Debt | 23,000 | 21,200 | 16,800 | 18,600 | 12,900 | |
| 51,600 | 46,800 | 43,300 | 34,500 | 34,100 | ||
| Financial Ratios | ||||||
| Acid-Test Ratio | 0.9 | 1.0 | 0.9 | 1.0 | 1.3 | |
| 22.5% | 15.5% | 12.8% | 10.9% | 9.9% | ||
| Rate of Return on Common Stockholders' Equity | 44.2% | 28.7% | 24.1% | 19.4% | 18.9% | |
Requirements
Analyze the company's financial summary for the fiscal years 2014-2018 to decide whether to invest in the common stock of XYZ. Include the following sections in your analysis.
- Trend analysis for net sales revenue and net income (use 2014 as the base year).
- Profitability analysis.
- Evaluation of the ability to sell merchandise inventory.
- Evaluation of the ability to pay debts.
- Evaluation of dividends.
- Should you invest in the common stock of XYZ Athletic Supply, Inc.? Fully explain your final decision
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Question
The income statement of Cheyenne Company is shown below.
CHEYENNE COMPANYINCOME STATEMENTFOR THE YEAR ENDED DECEMBER 31, 2020
Sales revenue
$6,890,000
Cost of goods sold
Beginning inventory
$1,910,000
Purchases
4,410,000
Goods available for sale
6,320,000
Ending inventory
1,620,000
Cost of goods sold
4,700,000
Gross profit
2,190,000
Operating expenses
Selling expenses
460,000
Administrative expenses
700,000
1,160,000
Net income
$1,030,000
Additional information:
1.
Accounts receivable decreased $350,000 during the year.
2.
Prepaid expenses increased $160,000 during the year.
3.
Accounts payable to suppliers of merchandise decreased $300,000 during the year.
4.
Accrued expenses payable decreased $90,000 during the year.
5.
Administrative expenses include depreciation expense of…
Selected information from Bigg Company's financial statements follows:
Fiscal Year Ended December 31
2019
2018
2017
(in thousands)
Gross sales
$2,004,719
$1,937,021 $1,835,987
Less: Sales discounts
4,811
4,649
4,406
Less: Sales returns and allowances
2,406
2,324
2,203
Net sales
$1,997,502
$1,930,048 $1,829,378
Cost of goods sold
621,463
619,847
660,955
Gross profit
$1,376,039
$1,310,201 $1,168,423
Operating expenses
577,369
595,226
583,555
Operating income
$798,670
$714,975
$584,868
Other income (expenses)
15,973
(6,070)
(8,773)
Net income
$814,643
$708,905
$576,095
At December 31
2019
2018
2017
(in thousands)
Accounts receivable
$201,290
$195,427
$182,642
Less: Allowance for doubtful accounts
2,516
2,736
2,192
Net accounts receivable
$198,774
$192,691
$180,450
Required:
1. Calculate the following ratios for 2018 and 2019. Round your answers to two decimal places.
2018
2019
a. Gross profit margin
67.88
%
68.89
%
b. Operating margin
37.04
39.98
c. Net profit margin
х %
36.77
40.78
%
d.…
A company reports the following financial information:
Inventory, December 31, 2019
Inventory, December 31, 2020
Net Sales for 2020
$ 75,000
125,000
850,000
Cost of Goods Sold for 2020
400,000
The company's inventory turnover ratio is closest to
O 0.19 times
O 4.00 times
O 2.13 times
O 5.33 times
Chapter 17 Solutions
Horngren's Accounting (12th Edition)
Ch. 17 - Prob. 1QCCh. 17 - Prob. 2QCCh. 17 - Prob. 3QCCh. 17 - Prob. 4QCCh. 17 - Prob. 5QCCh. 17 - Prob. 6QCCh. 17 - Prob. 7QCCh. 17 - Prob. 8QCCh. 17 - Prob. 9QCCh. 17 - Prob. 10QC
Ch. 17 - Prob. 1RQCh. 17 - Prob. 2RQCh. 17 - Prob. 3RQCh. 17 - Prob. 4RQCh. 17 - Prob. 5RQCh. 17 - Prob. 6RQCh. 17 - What is benchmarking, and what are the two main...Ch. 17 - Prob. 8RQCh. 17 - Prob. 9RQCh. 17 - Prob. 10RQCh. 17 - Prob. 11RQCh. 17 - Prob. 12RQCh. 17 - Prob. 13RQCh. 17 - Prob. S17.1SECh. 17 - Prob. S17.2SECh. 17 - Prob. S17.3SECh. 17 - Prob. S17.4SECh. 17 - Prob. S17.5SECh. 17 - Prob. S17.6SECh. 17 - Computing inventory, gross profit, and receivables...Ch. 17 - Prob. S17.8SECh. 17 - Measuring profitability Learning Objective 4...Ch. 17 - Prob. S17.10SECh. 17 - Prob. S17.11SECh. 17 - Prob. S17.12SECh. 17 - Prob. E17.13ECh. 17 - Prob. E17.14ECh. 17 - Prob. E17.15ECh. 17 - Prob. E17.16ECh. 17 - Prob. E17.17ECh. 17 - Prob. E17.18ECh. 17 - Prob. E17.19ECh. 17 - Prob. E17.20ECh. 17 - Prob. E17.21ECh. 17 - Prob. E17.22ECh. 17 - Prob. P17.23APGACh. 17 - Prob. P17.24APGACh. 17 - Prob. P17.25APGACh. 17 - Prob. P17.26APGACh. 17 - Using ratios to evaluate a stock investment...Ch. 17 - Prob. P17.28APGACh. 17 - Prob. P17.29APGACh. 17 - Prob. P17.30BPGBCh. 17 - Prob. P17.31BPGBCh. 17 - Prob. P17.32BPGBCh. 17 - Prob. P17.33BPGBCh. 17 - Prob. P17.34BPGBCh. 17 - Prob. P17.35BPGBCh. 17 - Completing a comprehensive financial statement...Ch. 17 - Prob. P17.37CTCh. 17 - Prob. P17.38CPCh. 17 - Prob. 17.1DCCh. 17 - Prob. 17.1EICh. 17 - Financial Statement Case 17-1 Use Target...
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