ACCT20200 Study Guide - Quiz Guide: Working Capital, Financial Statement, Current Liability

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ochrecricket616

26 Jan 2016

School

Department

Accountancy

Course

ACCT20200

Professor

Meyer William

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Document Summary

Horizontal analysis (trend analysis) = shows the changes between years in the financial data in both dollar and percentage form. Dollar change = current year figure (dollar amounts) - base year figure. Percentage change for horizontal analysis = (dollar change / base year. Trend percentage (definition) = states several years" financial data in terms of a base year, which equals 100 percent. Trend percentage = (current year amount / base year amount) x 100% Vertical analysis = focuses on the relationships among financial statement items at a given point in time. Common-size financial statement = a vertical analysis in which each financial statement item is expressed as a percentage. Working capital (definition) = the excess of current assets over current. Working capital (equation) = current assets - current liabilities. Current ratio (equation) = current assets / current liabilities. Current ratio (definition) = the current ratio measures a company"s short- term debt paying ability.

Related Questions

Evaluate the financial performance of Coca-Cola; (KO) and Pepsi (PEP) for the year ended December 31, 2016. Follow the instructions below to access each companyâs information and perform a financial analysis based on the financial measures we have learned in this course.

Select Http://www.yahoo.com/ and then select Finance. In the Search section at the top of the screen select KO for Coca-Cola and PEP for Pepsi

Select âFinancialsâ and select Income Statement when accessing the Income Statement

Select âFinancialsâ and select Balance Sheet when accessing the Balance Sheet

Do the following for KO and PEP for the year ended 12/31/16 only

Perform a vertical analysis of the Income Statement for KO and PEP for the year ended 12/31/16.

Include in your vertical analysis all of following as a % of total revenue:

Cost of Revenue as a % of Total Revenue

Gross Profit as a % of Total Revenue

Selling, gen and administrative expenses as a % of Total Revenue

Operating Income as a % of Total Revenue

Net Income as a % of Total Revenue

Current Ratio

Accounts Receivable turnover. Assume the total revenue on the income statement represents all sales on account for the year

Average collection period

Merchandise Inventory turnover. Assume the Cost of Revenue on the Income Statement is the same as the Cost of Goods Sold

Debt to Asset Ratio

Return on Assets Ratio

Asset Turnover

In preparing the vertical analysis and other financial analysis above; define each measure and identify the strengths and weaknesses of KO and PEP as related to each other. Below is an example of you should set it up.

Working Capital	KO	PEP
Current Assets	$ 34,010,000	$ 27,089,000
- Current Liabilities	$ 26,532,000	$ 21,135,000
Net Working Capital =	$ 7,478,000	$ 5,954,000

Strength or Weakness

Working Capital measures the ability of a company to meet its short-term obligations with current assets. Pepsi is and Coke are performing at about the same level. Cokes working capital is a little higher because they have higher current assets and current liabilities.

Requirements for Each Group

1.The vertical analysis prepared in 4 A above.

2.All of your computations for the financial analysis. (4 B through 4 H)

3.Identification of strengths and weaknesses. (Include a definition of each financial measure, a description of which company is doing better in each financial measure including the vertical analysis and explain why)

4.All group members must submit the Report Project Team Assessment

5.If the requirements above are not met, points will be deducted from Parts of the group projects.

Enter all requirements on the Group Project Problem 4 Tab.

Submit one set of answers per group for all four problems. Make sure to include each group members name at the top of each spreadsheet.

Each group member should download the Group Team Assessment and evaluate themselves and everyone else in their group. This evaluation should be submitted anonymously.

erincicada506

Choose a publicly traded company and perform an expandedanalysis on the financial statements (AMAZON.COM INC) . Use theannual statements in Yahoo Finance (http://finance.yahoo.com/quote/AMZN?p=AMZN ). Complete thefollowing for your chosen firm in an Excel spreadsheet:

1. Horizontal and vertical analysis of the income statements forthe past three years (all yearly balances set as a percentage oftotal revenues for that year).

2. Horizontal and vertical analysis of the balance sheets forthe past three years (all yearly balances set as a percentage oftotal assets for that year).

3. Ratio analysis (nine ratios of your choosing) for the pastthree years PLUS a measurement for the creditworthiness of yourfirm as measured by Altmanâs Z-score. You MUST also present currentyear competitor ratios for your ratio analysis Ebay; (http://finance.yahoo.com/quote/EBAY/?p=EBAY ). Comparing yourfirmâs ratios to a close competitor or an industry-average ratiomakes your analysis much more meaningful.

**Financial ratios are mathematical comparisons of financialstatement accounts or categories; 1. The current ratio iscalculated by dividing current assets by current liabilities. 2.The working capital ratio is calculated by dividing current assetsby current liabilities. 3. The times interest earned ratio iscalculated by dividing income before interest and income taxes bythe interest expense. 4. Accounts receivable turnover is calculatedby dividing net credit sales by the average accounts receivable forthat period. 5. The inventory turnover ratio is calculated bydividing the cost of goods sold for a period by the averageinventory for that period. 6. The asset turnover ratio iscalculated by dividing net sales by average total assets 7. Thereturn on equity ratio formula is calculated by dividing net incomeby shareholder's equity. 8. The profit margin ratio formula can becalculated by dividing net income by net sales. 9. The return onassets ratio formula is calculated by dividing net income byaverage total assets.**

Much of this course has concentrated on learning the financialstatements, primarily because there was not an accountingprerequisite. Because of this concentration, you may find thisassignment challenging. However, if you understand the financialstatements, then the horizontal and vertical analysis should berather intuitive. For example, if you see sales rise by 20%, thenshouldnât you also see net income rise by 20% or more if themanagers are effective at controlling costs? If you see sales riseby 20% and assets rise by 40%, you have to ask why this ishappening. It would appear that assets have risen too far given thesales that are generated from those assetsâwhy did this occur? Youmay have to research that type of question and discuss it in youranalysis.

Amazon's financial statements:

http://finance.yahoo.com/quote/AMZN?p=AMZN

sangriabee917

Common Size Income statement
	2017		2016
	$M	Percentage	$M	Percentage
Operating revenue	2319	100%	2375	100%
Operating expenses	-1666	-71.84%	-1725	-72.63%
Earnings before interest, tax, depreciation, amortisation,changes in fair value of hedges and other signifcant items(EBITDAF)	653	28.16%	650	27.37%
Depreciation and amortisation	-264	-11.38%	-236	-9.94%
Impairment of assets	-10	-0.43%	-4	-0.17%
Loss on sale of assets	-4	-0.17%	-1	-0.04%
Net change in fair value of electricity and other hedges	-76	-3.28%	-15	-0.63%
Operating profit	299	12.89%	402	16.93%
Finance Cost	79	3.41%	80	3.37%
Interest Income	2	0.09%	2	0.08%
Net change in fair value of treasury instruments	55	2.37%	-68	-2.86%
Net profit before tax	277	11.94%	256	10.78%
Income tax expense	-80	-3.45%	-71	-2.99%
Net proft after tax attributed to the shareholders of the parentcompany	197	8.50%	185	7.79%
Earnings per share (EPS) attributed to ordinary equityholders of the parent	cents		cents
Basic and diluted earnings per share	7.7	0.33%	7.2	0.30%

COMPREHENSIVE INCOME STATEMENT

2017

2016

Percentage

Net profit after tax

197

8.50%

185

7.79%

Other comprehensive income

Intems that will not be reclassifed to profit or loss

Asset revaluation

428

18.46%

889

37.43%

Defferred tax on the above item

-120

-5.17%

-248

-10.44%

Items that may be reclassified to profit or loss

308

641

Net gain on cash flow hedges

0.09%

Exchange differences arising from translation of foreignoperation

0.04%

-23

-0.97%

Income tax on the above items

0.13%

-23

-0.97%

Other comprehensive income for the year, net of tax

311

13.41%

618

26.02%

Total comprehensice income for the year, net of tax attributedto shareholders of parent company

508

21.91%

803

33.81%

BALANCE SHEET

	2017		2016
	$M	Percentage	$M	Percentage
Current Assets
Cash and cash equivalents	80	0.92%	118	1.38%
Trade receivables	260	3.00%	194	2.27%
Financial Instruments	59	0.68%	71	0.83%
Other assets	32	0.37%	23	0.27%
Total Current Assets	432	5.00%	406	5.00%
Non-current assets
Property, plant and equipment	7961	91.88%	7771	91.02%
Intangible assets	58	0.67%	47	0.55%
Deferred tax	43	0.50%	40	0.47%
Financial Instruments	172	1.98%	274	3.21%
Total non-current assets	8234	95.00%	8132	95.00%
Total assets	8665	100.00%	8538	100.00%
Current Liabilities
Payables and accuals	296	3.42%	205	2.40%
Employee entitlements	15	0.17%	15	0.18%
Current portion of termborrowings	170	1.96%	214	2.51%
Finance lease payable	1	0.01%	1	0.01%
Financial Instruments	67	0.77%	48	0.56%
Current tax payable	30	0.35%	30	0.35%
Total current Liabilities	579	6.68%	513	6.01%
Non-current liabilities
Term borrowings	1022	11.79%	1000	11.71%
Deferred tax	1710	19.73%	1617	18.94%
Provisions	9	0.10%	8	0.09%
Finance lease payable	46	0.53%	47	0.55%
Financial Instruments	124	1.43%	203	2.38%
Term payables	93	1.07%	100	1.17%
Total non-current liabilities	3004	34.67%	2975	34.84%
Total liabilities	3583	41.35%	3488	40.85%
Net assets	5082	58.65%	5050	59.15%
Shareholders' equity
Share capital	1598	18.44%	1597	18.70%
Reserves	3484	40.21%	3453	40.44%
Total shareholders' equity	5082	58.65%	5050	59.15%

Using the following financial ratiosfor 2016 and 2017 periods, and other associated

information available in the publicdomain, assess the financial health of MEL from the

view of an investor.

Liquidity ratios

b) Asset management efficiencyratios

c) Profitability ratios

d) Market ratios

Assume you are a banker evaluating aloan request from Meridian Energy Limited

(MEL) for $220 million. ConsideringMELâs recent earnings announcements and

earnings forecast updates, what wouldbe your concerns in deciding on approval or

denial of the loan request? Use thecompanyâs capital structure ratios for 2016 and 2017

in your explanation.

apricotwallaby871

ACCT20200 Study Guide - Quiz Guide: Working Capital, Financial Statement, Current Liability

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