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Financial statements help in calculating the value of the firm and also show the position of the business. Financial statement includes three statements:
1. The balance sheet (along with shareholder’s equity statement).
2. The income statement.
3.
To evaluate:
The performance of the company from the given financial statement.
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Answer to Problem 98.1C
Ratio analysis
Particular | 2018 | 2019 |
1.14 | 1.126 | |
2.45 | 2.47 | |
0.33 | 0.32 | |
0.71 | 0.71 | |
0.0017 | 0.031 | |
0.072 | 0.033 | |
0.015 | 0.07 |
The increase in the sales volume of the company leads to an increased profit. The ratio analysis enables the investors and shareholders to view the company’s sound financial position.
Analysis of the company as per the given statement:
The Company increases profit from 2017 to 2019 is $47968.
The Company increases the sale from 2017 to 2019 is $119747.
The Company increases the operating profit also from 2017 to 2019 $125047.
The Company increases the Earning per share from $0.109 per share to 0.98 per share.
The Company increases the assets from 2017 to 2019 is $329878.
Explanation of Solution
For 2018
For 2019
The five steps to evaluate the financial statement are:
- Determining the economic characteristics of the industry.
- Assessing the strategies of the company.
- Assessing the quality of the firm’s financial statements.
- Analyzing the current profitability ratio and risk ratio.
- Compute the value of the firm for its shareholders.
The increase in the sales volume of the company leads to an increased profit. The ratio analysis enables the investors and shareholders to view the company’s sound financial position.
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Chapter 12 Solutions
Cornerstones of Financial Accounting
- Requirements: a. Prepare horizontal analysis based on the above statements presented (for percent: round of your answers to 2 decimal places) Music Lover, Inc.xlsx b. Evaluate the company's financial position and results of operation using the comparative statement analysis i. Short-term solvency analysis ii. Long-term financial position analysis iii. Operating efficiency and profitability analysisarrow_forwardThe Kelly Services, Inc., and subsidiaries partial statement s of earnings from its annual report are presented below. 2020 2019 Revenues from services 4314.8 5517.3 Cost of services 3613.1 4539.7 Gross Profit 701.7 977.6 Selling and administrative expense 794.7 967.4 Asset impairments 53.1 80.5 Net earnings (loss) (164.1) (70.3) Prepare a horizontal common size analysis, and comment on the trend.arrow_forwardComprehensive: Income Statement and Retained Earnings Milwaukee Manufacturing Company presents the following partial list of account balances, after adjustments, as of December 31, 2019: The following information is also available but is not reflected in the preceding accounts: a. The company sold Division E (a major component of the company) on August 2, 2019. During 2019, Division E had incurred a pretax loss from operations of 16,000. However, because the acquiring company could vertically integrate Division E into its facilities, Milwaukee Manufacturing was able to recognize a 42,000 pretax gain on the sale. b. On January 2, 2019, without warning, a foreign country expropriated a factory of Milwaukee Manufacturing which had been operating in that country. As a result of that expropriation, the company has incurred a pretax loss of 30,000. c. The common stock was outstanding for the entire year. A cash dividend of 1.20 per share was declared and paid in 2019. d. The 2019 income tax expense totals 31,050 and consists of the following: Required: 1. As supporting documents for Requirement 2, prepare separate supporting schedules for selling expenses and for general and administrative expenses (include depreciation expense where applicable in these schedules). 2. Prepare 2019 multiple-step income statement for Milwaukee Manufacturing. 3. Prepare a 2019 retained earnings statement. 4. Next Level What was Milwaukee Manufacturings return on common equity for 2019 if its average shareholders equity during 2019 was 500,000? What is your evaluation of this return on common equity if its target for 2019 was 15%? 5. Next Level Discuss how Milwaukee Manufacturings income statement in Requirement 2 might be different if it used IFRS.arrow_forward
- using the report given,provide and comment on the following: You meed to analyse the items under the consolidated statement of profit or loss both years 2019 and 2020. Provide an analysis using this part.arrow_forwardTotal liabilities and shareholders' equity *?arrow_forwardEvaluate the company's financial position and results of operation using the comparative statement analysis: i. Short-term solvency analysis ii. Long-term financial position analysis iii. Operating efficiency and profitability analysisarrow_forward
- Which format of Income statement is used, single step or multi-step income statement? Briefly discuss the difference between the two type of Income statement.arrow_forward1. Compute for the company's profitability and operating efficiency's ratios for 2019 B.Operating Efficiency a. Asset Turnover b. Fixed Asset Turnover c. Inventory Turnover d. Days in Inventory e. AR Turnover f. Days in ARarrow_forward4. Comment on the company’s ability to utilize its assets and manage its liabilities effectively using the following efficiency ratios a. Total Asset Turnoverb. Accounts Payable Turnoverc. Return on Total Assets (ROA)arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningIntermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage LearningIntermediate Financial Management (MindTap Course...FinanceISBN:9781337395083Author:Eugene F. Brigham, Phillip R. DavesPublisher:Cengage Learning
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