Prepared by Johnny Howard © 2015 South-Western, a part of Cengage Learning

19–2 © 2015 South-Western, a part of Cengage Learning

19–3 © 2015 South-Western, a part of Cengage Learning for Financial Statements Balance sheet Assets Liabilities Net worth Income statement Horizontal analysis Vertical analysis Base year analysis T E R M S

19–4 © 2015 South-Western, a part of Cengage Learning to Analyzing Balance Sheets 1.Compute the percent each item is of the total assets or of the total liabilities and shareholders’ equity (net worth) for the base year and current year. 2.Compute the amount and percent of change between the two dates being compared. 1

19–5 © 2015 South-Western, a part of Cengage Learning

19–6 © 2015 South-Western, a part of Cengage Learning

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19–8 © 2015 South-Western, a part of Cengage Learning

19–9 © 2015 South-Western, a part of Cengage Learning

19–10 © 2015 South-Western, a part of Cengage Learning

19–11 © 2015 South-Western, a part of Cengage Learning Computing Business Operating Ratios Working capital ratio = Total current assets ÷ Total current liabilities Acid test ratio = (Total of cash + Accounts receivable) ÷ Total current liabilities Ratio of accounts receivable to net sales = Accounts receivable ÷ Net sales Average inventory (annual) = (Beginning inventory + Ending inventory) ÷ 2 Inventory turnover Cost of goods sold ÷ Average inventory T E R M S 3

19–12 © 2015 South-Western, a part of Cengage Learning Computing Business Operating Ratios (cont’d) Relationship of net income to net sales = Net income ÷ Net sales Rate of return on investment = Net income ÷ Shareholders’/owners’ equity T E R M S 3

19–13 © 2015 South-Western, a part of Cengage Learning

19–14 © 2015 South-Western, a part of Cengage Learning

19–15 © 2015 South-Western, a part of Cengage Learning Chapter Terms for Review accounts receivable acid test ratio assets balance sheet financial statements income statement liabilities net revenue net worth rate of return on investment ratio ratio of accounts receivable to net sales relationship of net income to net sales working capital working capital ratio

19–16 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis A 1. In the balance sheet, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to two decimal places.

19–17 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis A 1. In the balance sheet, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to two decimal places.

19–18 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis A Solve the following balance sheet problems.

19–19 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis B 3. In the balance sheet, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to one decimal place. Note that totals will sometimes be different from individual amounts because of rounding.

19–20 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis B 3. In the balance sheet, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to one decimal place. Note that totals will sometimes be different from individual amounts because of rounding.

19–21 © 2015 South-Western, a part of Cengage Learning Assignment 19.1: Balance Sheet Analysis B Solve the following balance sheet problems.

19–22 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis A 1. In the income statement, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to two decimal places.

19–23 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis A 1. In the income statement, find the percent for each 2015 and 2014 item. Then find the amount and percent of change. Round percents to two decimal places.

19–24 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis A Solve the following income statement problems.

19–25 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis B 3. In the income statement, find the percent for each 2015 and 2014 item, then find the amount and percent of change. Round percents (no decimal places).

19–26 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis B 3. In the income statement, find the percent for each 2015 and 2014 item, then find the amount and percent of change. Round percents (no decimal places).

19–27 © 2015 South-Western, a part of Cengage Learning Assignment 19.2: Income Statement Analysis B Solve the following income statement problems.

19–28 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios A 1. Angela Adams was considering investing in a business. She used the statement in analyzing the Tic Tock Clock Shop. Compute the net changes in the balance sheet and income statement. Round to one decimal place.

19–29 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios A 1. Angela Adams was considering investing in a business. She used the statement in analyzing the Tic Tock Clock Shop. Compute the net changes in the balance sheet and income statement. Round to one decimal place.

19–30 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios A 1. Angela Adams was considering investing in a business. She used the following statement in analyzing the Tick Tock Clock Shop. Compute the net changes in the balance sheet and income statement. Round to one decimal place.

19–31 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios A 1. Angela Adams was considering investing in a business. She used the following statement in analyzing the Tick Tock Clock Shop. Compute the net changes in the balance sheet and income statement. Round to one decimal place.

19–32 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios A 1. Angela Adams was considering investing in a business. She used the following statement in analyzing the Tick Tock Clock Shop. Compute the net changes in the balance sheet and income statement. Round to one decimal place.

19–33 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios B Solve the following problems.

19–34 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios C 3. Angela Adams was offered a second business. She received these statements for 2015 and Complete calculations for a comparative balance sheet and a comparative income statement for the Grandfather Clock Shop, showing the amount and percent of change.

19–35 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios C 3. Angela Adams was offered a second business. She received these statements for 2015 and Complete calculations for a comparative balance sheet and a comparative income statement for the Grandfather Clock Shop, showing the amount and percent of change.

19–36 © 2015 South-Western, a part of Cengage Learning Assignment 19.3: Financial Statement Ratios C