XYZ ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) 2018 2017 2016 2015 2014 2013 (Dollar amounts in thousands except per share data) $ 275,000 $ 22,000 $ 199,000 $ 171,000 $ 131,000 Net Sales Revenue Net Sales Revenue Increase Domestic Comparative Store Sales Increase 24% 12% 16% 31% 17% 6% 5% 8% 10% 2,090 1,780 1,770 1,700 1,310 Other Income-Net 208,725 169,386 154,822 134,235 103,883 Cost of Goods Sold 41,280 36,340 31,670 27,450 22,540 Selling and Administrative Expenses Interest: Interest Expense (1,070) (1,370) (1,330) (1,100) (800) 140 155 150 230 140 Interest Income Income Tax Expense 4,420 3,900 3,610 3,390 2,730 21,735 12,939 9,488 6,755 2,497 Net Income Per Share of Common Stock: 1.10 0.80 0.70 0.50 0.28 Net Income 0.45 0.43 0.39 0.35 0.31 Dividends Financial Position Current Assets, Excluding Merchandise Inventory Merchandise Inventory $ 30,900 $ 27,200 $ 26,800 $ 24,400 $ 21,800 24,700 22,400 21,600 19,300 17,000 $ 16,800 51,600 46,200 40,500 35,000 25,200 Property, Plant, and Equipment, Net Total Assets 107,200 95,800 88,900 78,700 64,000 32,600 27,800 28,800 25,600 17,000 Current Liabilities Long-term Debt Stockholders' Equity Financial Ratios Acid-Test Ratio 23,c00 21,200 16,800 18,600 12,900 51,600 46,800 43,300 35,500 34,100 0.9 1.0 0.9 1.0 1.3 Rate of Return on Total Assets 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%

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Completing a comprehensive financial statement analysis

In its annual report, XYZ Athletic Supply, Inc. includes the following five-year financial summary:

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.

XYZ ATHLETIC SUPPLY, INC.
Five-Year Financial Summary (Partial; adapted)
2018
2017
2016
2015
2014
2013
(Dollar amounts in thousands except per share data)
$ 275,000 $ 22,000 $ 199,000 $ 171,000 $ 131,000
Net Sales Revenue
Net Sales Revenue Increase
Domestic Comparative Store Sales Increase
24%
12%
16%
31%
17%
6%
5%
8%
10%
2,090
1,780
1,770
1,700
1,310
Other Income-Net
208,725
169,386
154,822
134,235
103,883
Cost of Goods Sold
41,280
36,340
31,670
27,450
22,540
Selling and Administrative Expenses
Interest:
Interest Expense
(1,070)
(1,370)
(1,330)
(1,100)
(800)
140
155
150
230
140
Interest Income
Income Tax Expense
4,420
3,900
3,610
3,390
2,730
21,735
12,939
9,488
6,755
2,497
Net Income
Per Share of Common Stock:
1.10
0.80
0.70
0.50
0.28
Net Income
0.45
0.43
0.39
0.35
0.31
Dividends
Financial Position
Current Assets, Excluding Merchandise Inventory
Merchandise Inventory
$ 30,900
$ 27,200
$ 26,800
$ 24,400
$ 21,800
24,700
22,400
21,600
19,300
17,000
$ 16,800
51,600
46,200
40,500
35,000
25,200
Property, Plant, and Equipment, Net
Total Assets
107,200
95,800
88,900
78,700
64,000
32,600
27,800
28,800
25,600
17,000
Current Liabilities
Long-term Debt
Stockholders' Equity
Financial Ratios
Acid-Test Ratio
23,c00
21,200
16,800
18,600
12,900
51,600
46,800
43,300
35,500
34,100
0.9
1.0
0.9
1.0
1.3
Rate of Return on Total Assets
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%

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