CH 18 FINANCIAL STATEMENT ANALYSIS Lecture 25, 26 Mata kuliah: F0024 – Pengantar Akuntansi II Tahun: 2010

Bina Nusantara University 3 QUESTIONS 3.Two popular methods of financial statement analysis are horizontal analysis and vertical analysis. Explain the difference between these two methods. 6.Name the major ratios useful in assessing: a. Liquidity b. Solvency

QUESTIONS 8.What do the following classes of ratios measure? a. Liquidity ratios b. Profitability ratios c. Solvency ratios 9. What is the difference between the current ratio and the acid-test ratio? Bina Nusantara University 4

E18-3 The comparative condensed balance sheets of Conard Corporation are presented below. Bina Nusantara University 5 CONARD CORPORATION Comparative Condensed Balance Sheets December Assets Current Assets$ 74,00080,000 Property, plant, and equipment net99,00090,000 Intangibles27,00040,000 Total Assets200,000210,000

E18-3 Bina Nusantara University 6 CONARD CORPORATION Comparative Condensed Balance Sheets December Liabilities and stockholders’ equity Current liabilities42,00048,000 Long-term liabilities143,000150,000 Stockholders’ equity15,00012,000 Total liabilities and stockholders’ equity200,000210,000

E18-3 Instructions: a.Prepare a horizontal analysis of the balance sheet data for Conard Corporation using 2010 as a base. b.Prepare a vertical analysis of the balance sheet data for Conard Corporation in columnar form for Bina Nusantara University 7

P18-2 The comparative statement of Villa Tool Company are presented below. Bina Nusantara University 8 VILLA TOOL COMPANY Income Statement For the Year Ended December Net sales$ 1,818,5001,750,500 Cost of Goods Sold1,011,500996,000 Gross Profit807,000754,500 Selling administrative expense516,000479,000 Income from operations291,000275,500

P18-2 Bina Nusantara University 9 VILLA TOOL COMPANY Income Statement For the Year Ended December Income from operations291,000275,500 Other expenses and losses interest expense 18,00014,000 Income before income taxes273,000261,500 Income tax expense81,00077,000 Net Income192,000184,500

P18-2 Bina Nusantara University 10 VILLA TOOL COMPANY Balance Sheets December Assets Current assets Cash$ 60,10064,200 Short-term investments69,00050,000 Accounts receivable (net)117,800102,800 Inventory123,000115,500 Total current assets369,900332,500

P18-2 Bina Nusantara University 11 VILLA TOOL COMPANY Balance Sheets December Total current assets369,900332,500 Plant assets (net)600,300520,300 Total assets970,200852,800

P18-2 Bina Nusantara University 12 VILLA TOOL COMPANY Balance Sheets December Liabilities & stockholders’ equity Current liabilities Account payable160,000145,400 Income taxes payable43,50042,000 Total current liabilities203,500187,400 Bonds Payable200,000 Total liabilities403,500387,400

P18-2 Bina Nusantara University 13 VILLA TOOL COMPANY Balance Sheets December Total liabilities403,500387,400 Stockholders’ equity Common stock ($5 par)280,000300,000 Retained earnings286,700165,400 Total stockholders’ equity566,700465,400 Total liabilities and stockholders’ equity970,200852,800

P18-2 All sales were on account. The allowance for doubtful accounts $3,200 on December 31, 2011 and $3,000 on December 31, Instructions: Compute the following ratios for (Weighted average common shares in 2011 were 57,000) a.Earnings per share b.Return on common stockholders’ equity. c.Return on assets d.Current Bina Nusantara University 14

P18-2 e.Acid-test f.Receivables turnover g.Inventory turnover h.Times interest earned i.Assets turnover j.Debt to total assets. Bina Nusantara University 15