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Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Ratio analysis Week 3 Using these data from the comparative balance sheet of Rosalez Company Complete Answer

Illustration 2-9
Financial ratio classifications

A single ratio by itself is not very meaningful. Accordingly, in this and the following chapters, we will use various comparisons to shed light on company performance:

1. Intracompany comparisons covering two years for the same company.
2. Industry-average comparisons based on average ratios for particular industries.
3. Intercompany comparisons based on comparisons with a competitor in the same industry

Question 1

Using these data from the comparative balance sheet of Rosalez Company, perform horizontal analysis. (If amount and percentage are a decrease show the numbers as negative, e.g. -55,000, -20% or (55,000), (20%). Round percentages to 0 decimal places, e.g. 12%.)
Increase or (Decrease)
Dec. 31, 2012 Dec. 31, 2011 Amount Percentage
Accounts receivable \$ 545,500 \$ 393,400 \$

%
Inventory \$ 820,400 \$ 604,600 \$

%
Total assets \$3,146,500 \$2,742,100 \$

%

Question 2

Using these data from the comparative balance sheet of Rosalez Company, perform vertical analysis. (Round percentages to 1 decimal place, e.g. 12.5%.)
Dec. 31, 2012 Dec. 31, 2011
Amount Percentage Amount Percentage
Accounts receivable \$ 543,900
% \$ 417,700
%
Inventory \$ 821,700
% \$ 617,000
%
Total assets \$3,175,700
% \$2,787,300
%

Question 3

Vertical analysis (common-size) percentages for Vallejo Company’s sales, cost of goods sold, and expenses are listed here.
Vertical Analysis 2012 2011 2010
Sales 100 % 100 % 100 %
Cost of goods sold 60.8 63.8 66.4
Expenses 24.7 27.8 28.8

Did Vallejo’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.

Question 4

Horizontal analysis (trend analysis) percentages for Spartan Company’s sales, cost of goods sold, and expenses are listed here.
Horizontal Analysis 2012 2011 2010
Sales 96.2 % 104.8 % 100.0 %
Cost of goods sold 101.0 98.0 100.0
Expenses 105.6 95.4 100.0

Explain whether Spartan’s net income increased, decreased, or remained unchanged over the 3-year period.

Question 5

These selected condensed data are taken from recent balance sheets of Bob Evans Farms (in thousands).
2009 2008
Cash \$ 13,606 \$ 7,669
Accounts receivable 23,045 19,951
Inventories 31,087 31,345
Other current assets 12,522 11,909
Total current assets \$ 80,260 \$ 70,874
Total current liabilities \$245,805 \$326,203

(a)

Compute the current ratio for each year. (Round answers to 2 decimal places, e.g. .12 : 1.)
2009 2008
Current ratio:
:1
:1

Question 6

Staples, Inc. is one of the largest suppliers of office products in the United States. It had net income of \$738.7 million and sales of \$24,275.5 million in 2009. Its total assets were \$13,073.1 million at the beginning of the year and \$13,717.3 million at the end of the year. What is Staples, Inc.’s asset turnover ratio and profit margin ratio? (Round answers to 2 decimal places, e.g. 1.25 or 2.05%.)
Asset turnover ratio
times
Profit margin ratio
%

Question 7

Selected data taken from a recent year’s financial statements of trading card company Topps Company, Inc. are as follows (in millions).
Net sales \$326.7
Current liabilities, beginning of year 41.1
Current liabilities, end of year 62.4
Net cash provided by operating activities 10.4
Total liabilities, beginning of year 65.2
Total liabilities, end of year 73.2
Capital expenditures 3.7
Cash dividends 6.2

Compute these ratios: current cash debt coverage ratio, cash debt coverage ratio, and free cash flow. Provide a brief interpretation of your results. (Round answers to 2 decimal places, e.g. 0.12.)
Current cash debt coverage ratio
times
Cash debt coverage ratio
times
Free Cash Flow \$
millions

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