FUND ACCOUNTING PRINCIPLES CONNECT
25th Edition
ISBN: 9781265342395
Author: Wild
Publisher: MCG
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 4BTN
To determine
1. Introduction:
Analysis of Financial Statements
- Analysis of Financial Statements is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
- It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
- Horizontal Analysis − Refers to comparison of the figures of the components of financial statements across the figures for the previous years to determine favorable or unfavorable trends
- Vertical analysis - Refers to comparison of the figures of the components of financial statements against each other in order to determine relative composition of the components in relation to the total
Meaning of horizontal and vertical analysis with examples
To determine
2. Introduction:
Ratio Analysis
- Ratio analysis is a study of several key metrics of a company based on the data presented in its' financial statements with an objective to evaluate the financial health of a company.
- It is essential for investors, stakeholders, government bodies etc. to evaluate the key metrics of an entity in order to ensure that the company fulfills the going concern principle and displays financial stability.
The key metrics mentioned above include the following:
- Equity Ratio − It is a measure of the total equity component out of the total capital employed by an entity that comprises of both debt and equity
- Return on Total Assets − A measure of the return earned by the shareholders on the total assets employed. It is an indicator of profitability in relation to the assets.
- Dividend Yield Ratio − It is a measure of the total dividend earned by the equity shareholder in relation to the shares held.
- Book Value per Share − It is a measure of the actual book value or
cost of the equity shares. It seeks to measure the actual price that the share is worth and the difference between market price and actual book value.
- Days' sales in inventory − A measure of the total outstanding collections for credit sales in terms of inventory. It is calculated to understand how many days the company holds inventory before selling it
Accounts receivable turnover − A measure of the relation between the turnover and accounts receivable measured in number of times.
- Debt Equity Ratio − A Measure of the total debt used to leverage the business in relation to the percentage of equity.
- Times Interest earned Ratio − A measure of the total income and the total interest payments made by the business. It seeks to measure how much of the earnings can finance interest costs and at what multiple. The higher the ratio, the better.
- Gross Margin Ratio − A measure of the gross margin earned from the turnover for the reporting period.
- Acid Test Ratio − Also known as quick ratio, it seeks to measure the liquidity position of the business.
To Prepare:
Ratios relating to the following building blocks of financial analysis:
- Liquidity And Efficiency
- Solvency,
- Profitability,
- Market Prospects
Expert Solution & Answer

Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Help
Austin Company uses a job order cost accounting system. The company's executives estimated that direct labor would be $8,400,000 (840,000 hours at $10/hour) and that factory overhead would be $5,400,000 for the current period. At the end of the period, the records show that there had been 300,000 hours of direct labor and $5,100,000 of actual overhead costs. Using direct labor hours as a base, what was the predetermined overhead allocation rate?
Please help me
Chapter 17 Solutions
FUND ACCOUNTING PRINCIPLES CONNECT
Ch. 17 - Prob. 1QSCh. 17 - QS 17-2 Standard of comparison C2
Identify which...Ch. 17 - Prob. 3QSCh. 17 - Trend percents P1 Use the following information to...Ch. 17 - QS17-5 Common-size analysis P2
Refer to the...Ch. 17 - QS 17-6 Computing current ratio and acid-test...Ch. 17 - QS 17-7 Computing accounts receivable turnover and...Ch. 17 - QS 17-8 Computing inventory turnover and days'...Ch. 17 - QS17-9 Computing total asset turnover P3
Dundee...Ch. 17 - Prob. 10QS
Ch. 17 - Prob. 11QSCh. 17 - QS 17-12 Computing price-earnings ratio and...Ch. 17 - Prob. 13QSCh. 17 - Prob. 14QSCh. 17 - QS 17-15A Identifying unusual and/or infrequent...Ch. 17 - Prob. 16QSCh. 17 - Prob. 17QSCh. 17 - Prob. 18QSCh. 17 - Prob. 19QSCh. 17 - Prob. 20QSCh. 17 - Prob. 21QSCh. 17 - Prob. 22QSCh. 17 - Exercise 17-1
Building blocks of analysis
Match...Ch. 17 - Prob. 2ECh. 17 - Prob. 3ECh. 17 - Prob. 4ECh. 17 - Prob. 5ECh. 17 - Prob. 6ECh. 17 - Prob. 7ECh. 17 - Prob. 8ECh. 17 - Prob. 9ECh. 17 - Prob. 10ECh. 17 - Exercise 17-11 Analyzing profitability P3 Q Refer...Ch. 17 - Prob. 12ECh. 17 - Prob. 13ECh. 17 - Prob. 14ECh. 17 - Prob. 15ECh. 17 - Exercise 17-16 Interpreting financial ratios A1 P3...Ch. 17 - Prob. 17ECh. 17 - Prob. 18ECh. 17 - Problem 17-1A Calculating and analyzing trend...Ch. 17 - Problem 17-2A Ratios, common-size statements, and...Ch. 17 - Problem 17-3A
Transactions, working capital, and...Ch. 17 - Problem 17-4A Calculating financial statement...Ch. 17 - Prob. 5PSACh. 17 - Prob. 6PSACh. 17 - Prob. 1PSBCh. 17 - Prob. 2PSBCh. 17 - Prob. 3PSBCh. 17 - Prob. 4PSBCh. 17 - Prob. 5PSBCh. 17 - Prob. 6PSBCh. 17 - SP 17 Use the following selected data from...Ch. 17 - Prob. 1AACh. 17 - Prob. 2AACh. 17 - Prob. 3AACh. 17 - Prob. 1DQCh. 17 - Prob. 2DQCh. 17 - Prob. 3DQCh. 17 - 4. What three factors would influence your...Ch. 17 - Prob. 5DQCh. 17 - Prob. 6DQCh. 17 - Prob. 7DQCh. 17 - Prob. 8DQCh. 17 - Prob. 9DQCh. 17 - Prob. 10DQCh. 17 - What ratios would you compute to evaluate...Ch. 17 - Why would a company’s return on total assets be...Ch. 17 - 13. Where on the income statement does a company...Ch. 17 - BTN 17-1 Refer to Apple’s financial statements in...Ch. 17 - Prob. 2BTNCh. 17 - Prob. 3BTNCh. 17 - Prob. 4BTNCh. 17 - Prob. 5BTN
Knowledge Booster
Similar questions
- The Harrison Company manufactures and sells bicycles. Each bicycle sells for $200, and the variable cost per unit is $130. Harrison's total fixed costs are $40,000, and budgeted sales are 5,000 units. What is the contribution margin per unit?arrow_forwardPalease give me answer accountingarrow_forwardWhat will net income bearrow_forward
- Calculate the amount of casharrow_forwardAnswer? ? Financial accounting questionarrow_forwardTokyo's Juice Bar operates a fresh juice stand at a local shopping center. Each juice requires 3/4 pound of mixed fruits, which are expected to cost $4 per pound during the summer months. Shop employees are paid $8 per hour. Variable overhead consists of utilities and supplies, and the variable overhead rate is $0.09 per minute of direct labor (DL) time. Each juice should require 4 minutes of direct labor time. 1. What is the standard cost of direct materials for each juice? 2. What is the standard cost of direct labor for each juice? 3. What is the standard cost of variable overhead for each juice?arrow_forward
- In 2015, Kingston Technologies' research and development department developed a new software algorithm. The research and development costs totaled $95,000. The software was patented on July 1, 2015. Legal costs to acquire the patent were $13,500. Kingston decided to amortize the patent over a 15-year period. Kingstons fiscal year ends on June 30. On July 1, 2020, a competitor released a new software that rendered Kingston's patent obsolete. 1. How much amortization expense should Kingston report in each year through the year ended June 30, 2020? 2. What amount of loss should Kingston report in the year ended June 30, 2021?arrow_forwardCan you help me with accounting questionsarrow_forwardAnderson Enterprises has a profit margin of 5.8% on total sales of $30,200,000. The company's total assets amount to $18,500,000, and its total debt is $9,200,000. What is the firm's Return on Assets (ROA)?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- AccountingAccountingISBN:9781337272094Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.Publisher:Cengage Learning,Accounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,
- Horngren's Cost Accounting: A Managerial Emphasis...AccountingISBN:9780134475585Author:Srikant M. Datar, Madhav V. RajanPublisher:PEARSONIntermediate AccountingAccountingISBN:9781259722660Author:J. David Spiceland, Mark W. Nelson, Wayne M ThomasPublisher:McGraw-Hill EducationFinancial and Managerial AccountingAccountingISBN:9781259726705Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting PrinciplesPublisher:McGraw-Hill Education


Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,

Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON

Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education

Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education