ACCOUNTING-Week3: Financial Statement Analysis Exercise PS: Guidance at bottom of this document.
QUESTION
Week3: Financial Statement Analysis Exercise
Name:
_________________________
PS:
Guidance at bottom of this document.
Instructions
1)
Calculate the value or the ratio of items in the
boxes
2)
Show your work by specifiying the formula you used for each of these
calculations.
3)
For $ values, no need to display any decimals, e.g Gross Profit = $34,000.
4)
For unitless ratios and percentages, display 1 decimal place, e.g. TIE = 2.8;
ROA = 4.7%.
(1)
(2)
Suggestion: Calculate the
subtotals (e.g. the current assets) before going on to answer the individual
questions.
Commonsize
Balance Sheet &
Income Statement
Big Apple Enterprises
2013
2014
2013
2014
Total Assets
62,000
72,000
100.0%
100.0%
Inventories
7,500
8,200
Receivables
21,000
21,000
Cash
4,500
6,000
Current Assets
Other Non-current Assets
10,500
11,300
Net Fixed Assets
18,500
25,500
Current Liabilities
19,000
14,000
Debt
23,000
28,000
Equity
20,000
30,000
Total Liabilities & Equity
Revenues
125,000
142,000
100.0%
100.0%
Cost of Goods Sold (COGS)
89,000
108,000
Gross Profit
SG&A
21,000
25,000
Operating Profit (EBIT)
Interest Expense
2,800
3,500
Earnings Before Taxes (EBT)
Taxes
Net Income After Tax (NIAT)
Other Information
Tax Rate
35%
35%
Number of Shares Outstanding
10,000
13,000
Common Dividends Paid
3,000
3,900
Share Price
$8.00
$7.50
2014 Summer2
For each of
the calculations or ratios below, indicate the formula that you are using to
compute the quantum as well as the numeric answer.
Year:
2014
3)
What is the company’s Gross Profit in 2014?
e.g.
Gross Profit = Rev – COGS
34,000
4)
What is the company’s
Gross Margin in 2014?
Gross Margin = ⦠specify
your formula used
5)
What is the company’s
Operating Profit (EBIT) in 2014?
EBIT = ⦠specify your formula used
6)
What was the company’s
Pretax Income in 2014? (EBT)
EBT = ⦠specify your formula used
7)
How much Income Tax did
they pay in 2014?
Income Tax = ⦠specify
your formula used
8)
What was the company’s
Net Income After Tax in 2014?
NIAT = ⦠specify your formula used
9)
What was the company’s
NOPAT in 2014?
NOPAT = ⦠specify your
formula used
10)
What was the company’s
Times Interest Earned in 2014?
TIE = ⦠specify your formula used
11)
What was the company’s
Profit Margin in 2014?
Profit Margin = â¦
specify your formula used
12)
What was the Company’s
Return on Assets in 2014 ?
ROA = ⦠specify your formula used
13)
What was the company’s
Return on Equity in 2014?
ROE = ⦠specify your formula used
14)
What is the company’s
Current Ratio in 2014?
Current Ratio = â¦
specify your formula used
15)
What is the company’s
Quick Ratio in 2014?
Quick Ratio = ⦠specify
your formula used
16)
What is the
company’s Total Asset Turnover Ratio
in 2014?
Total Asset Turnover = â¦
specify your formula used
17)
What is the company’s
Inventory Turnover Ratio in 2014?
Inventory Turnover = â¦
specify your formula used
18)
What is the company’s
Day’s Sales Outstanding (DSO) in 2014
assuming 365 days per year?
DSO = ⦠specify your formula used
19)
What is the rate of
the the company’s asset growth between
2013 and 2014?
Asset Growth = ⦠specify
your formula used
20)
What is the rate of the company’s sales’ growth between 2013
and 2014?
Sales Growth = ⦠specify
your formula used
21)
What were the company’s
Net Operating Working Capital in 2014?
NOWC = ⦠specify your
formula used
22)
What was the company’s
Operating Capital in 2014?
Operating Capital = â¦
specify your formula used
23)
What was the company’s
Debt to Equity Ratio in 2014?
Debt-to-Equity Ratio = â¦
specify your formula used
24)
What was the company’s
Equity Multiplier in 2014?
Equity Multiplier = â¦
specify your formula used
25)
What was the company’s
Return on Invested Capital (ROIC) in 2014?
ROIC = ⦠specify your formula used
26)
What was the company’s
Earnings Per Share in 2014?
EPS = ⦠specify your formula used
27)
What was the company’s
Price/Earnings Ratio in 2014?
PE Ratio = ⦠specify
your formula used
28)
What was the company’s
Dividend Payout Ratio in 2014?
Dividend Payout Ratio =
⦠specify your formula used
29)
What were the Dividends
Per Share paid in 2014?
Dividend Per Share = â¦
specify your formula used
30)
What was the Dividend
Yield in 2014?
Dividend Yield = â¦
specify your formula used
Guidance
Items highlighted in yellow are intermediate
calculations that could help you in calculating
some of the ratios.
(0)
Before you start Googling for any of the required financial
ratios to calculate the above,
please be aware that some financial ratios
havemore than one
variation. For example,
use of current accounting period’s Total Assets vs. the Average
of Total Assets of the
Beginning
and the Ending Total Asset of the accounting period. These variations have
valid rationale behind its use â¦
(1)
â¦
but for consistency in grading
this Exercises as well as the Exam, we will adopt the
officieal
ratios as is summarized in Vol 1, pg 521 [2014-edition]; pg 591
[2013-edition].
(2)
For
ratios that are not listed on above summary page, please check the textbook’s
Indexes
at the back of Vol 2 pg 1089 & 1114 [2014-edition]; Vol 1 pg 736
[2013-edition].
(3)
If
you still have questions regarding specific ratios, make an effort to attend
the Live
Classroom. It is bound to be asked by one of the students.
If
you are unable to attend, the session will be recorded for subsequent
playback.
Revenue is also known as Sales.
Net Income in (8) is
really Net Income After Tax; also called Earnings.
Q&A
Preferred Dividends info are normally shown “above the NIAT line” in the
Income Statement. If it can’t be derived from available info, assume it to be
0; we can’t make up numbers.
In any of the
financial ratios which involves using “averages”, for example Average Inventory, you can take its average if
financial data for two consecutive years are given and that these two
“columns” of data refer to “year-ending numbers”.
Can dividends payout
exceed NIAT? In practice, it is not illegal and it has
been done before but it generally does not make sense to do so other than
under “extrordinary” circumstances. It tends to send out a
“what’s going on?” big red flag; sort of like “using dividends
to buy investors’ hearts and similar to the comment made after the
recent presidential election? BUT, if the company has Retained Earnings,
it could technically do so and we have no further info from this Exercise
what the Board & the CFO is thinking. Work with the numbers given in the
Exercise; it is a good idea to clarify with the instructor too …
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