FINS1613 Study Guide - Quiz Guide: Income Statement, Financial Statement, Accounts Receivable
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1. Discuss the importance of financial statements and how they are used by businesses.
2. What is the basic format of the income statement and what is the relevance of the basic categories?
3. Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.
The Happy Auto Shop has the following annual information:
Gross Sales | $700,000 |
Net sales | $696,000 |
Gross profit | $448,000 |
What are the shop’s returns and allowances and cost of goods sold?
Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:
cash | $50 |
Checking account | $2,500 |
student loan balance | $6,000 |
stocks and bonds | $2,600 |
savings account | $5,850 |
residence | $110,000 |
automobile | $12,000 |
savings account | $5,800 |
automobile loan balance | $12,000 |
401K retirement account | $15,000 |
furniture, clothing, jewelry | $8,000 |
credit card balance | $4,000 |
mortgage loan balance | $99,000 |
What is the purpose of financial statement analysis? How do the three types of financial statement analysis differ from each other and when is each used?
Samantha Knight is applying for a small-business loan. She provides the bank with the following information:
cash in checking accounts | $5,000 |
cash in savings | $10,350 |
home market value | $145,500 |
first mortgage on house | $25,000 |
home equity loan limit | $70,000 |
home equity loan | $10,000 |
automobile market value | $19,000 |
automobile loan outstanding | $15,000 |
credit card debt | $1,500 |
Calculate the debt-to-asset ratio.
Calculate the debt-to-equity ratio.
What percentage of Samantha's assets is owned by others?
Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:
Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.
Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.
Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.
Perform a vertical analysis of the income statement.
Perform a vertical analysis of the balance sheet.
Based on your analysis, would you consider investing in Sam's Sandwich Delivery?
Excel Online Structured Activity: Statement of cash flows
You have just been hired as a financial analyst for BarringtonIndustries. Unfortunately, company headquarters (where all of thefirm's records are kept) has been destroyed by fire. So, your firstjob will be to recreate the firm's cash flow statement for the yearjust ended. The firm had $100,000 in the bank at the end of theprior year, and its working capital accounts except cash remainedconstant during the year. It earned $5 million in net income duringthe year but paid $700,000 in dividends to common shareholders.Throughout the year, the firm purchased $5.4 million of machinerythat was needed for a new project. You have just spoken to thefirm's accountants and learned that annual depreciation expense forthe year is $450,000; however, the purchase price for the machineryrepresents additions to property, plant, and equipment beforedepreciation. Finally, you have determined that the only financingdone by the firm was to issue long-term debt of $1 million at a 7%interest rate. The data has been collected in the Microsoft ExcelOnline file below. Open the spreadsheet and perform the requiredanalysis to answer the question below.
Statement of cash flows | |||
Cash at the Beginning of Year | $100,000.00 | ||
Change in Net Operating Working Capital Except Cash | $0.00 | ||
Net Income | $5,000,000.00 | ||
Common Dividends | $700,000.00 | ||
Machinery Equipment Purchases | $5,400,000.00 | ||
Depreciation Expense | $450,000.00 | ||
Long-Term Debt | $1,000,000.00 | ||
Interest Rate on Long-Term Debt | 7.00% | ||
Statement of Cash Flows | |||
I. Operating Activities | Formulas | ||
Net income | #N/A | ||
Depreciation expense | #N/A | ||
Change in net operating working capital exceptcash | $0.00 | ||
Net cash provided by (used in) operations | #N/A | ||
II. Long-Term Investing Activities | |||
Additions to property, plant and equipment | #N/A | ||
Net cash used in investing activities | #N/A | ||
III. Financing Activities | |||
Increase in long-term debt | #N/A | ||
Payment of common dividends | #N/A | ||
Net cash provided by financing activities | #N/A | ||
IV. Summary | |||
Net increase (decrease) in cash | #N/A | ||
Cash at beginning of year | $100,000.00 | ||
Cash at end of year | #N/A |
What was the firm's end-of-year cash balance? Recreate thefirm's cash flow statement to arrive at your answer. Write out youranswer completely. For example, 5 million should be entered as5,000,000. Round your answer to the nearest dollar, ifnecessary.