Accounting Question

5. Please perform Vertical and Horizontal Analysis on the following company and when done, please include a paragraph on your findings. only do question #5

Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
1. Using the following information, construct a Formal Income Statement for the “Aria
Corporation”.
Use end of current year for date.
Times Interest Earned
3
Gross Profit Rate
20% (hint: this helps you figure out Sales along with COGS)
Tax rate
30%
COGS
$1,600,000
Interest expense
$ 50,000
General and Administrative expenses ?????????
Sales ??????????
Gross Profit
??????????
EBIT ??????????
EBT
??????????
EAT
??????????
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
2. Based on the following financial statements, compute the following ratios for the “AGC
Company”- for 2020.
Compare your answers to the industry averages by indicating if AG Company is better or worse
than industry, and comment on your findings.
Balance Sheet
Assets:
Cash
AR
Inventory
Total Current Assets
Net Property
Other Assets
Total Assets
Liabilities:
AP
Notes Payable (6%)
Accrued Expenses
LT Debt (8%)
Total Liabilities
Stockholder’s Equity:
Common Stock
Retained Earnings
Total S.E.
Total Liabilities and S.E.
$10,000
50,000
44,000
$104000
50,000
4,000
$158000
$20,000
14,000
6,000
30,000
$70,000
$25,000
63,000
88,000
$158,000
Income Statement
Sales
COGS
GP
S & A exp
EBIT
Int. Exp.
EBT
Tax Exp (50%)
EAT
$240,000
192,000
48,000
39,000
9,000
3,240
5,760
2,880
$2,880
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
Problem 2 continued: Show you’re your work below. Please circle the correct answer.
Is the AGC Corporation better or worse than these industry standards?
Current ratio
Inventory turnover
Fixed asset turnover
Total asset turnover
Debt Ratio
Times interest earned
Profit margin
Return on assets
Return on equity
Industry
Standards
1.28
3.5X
2.4X
.76X
.45
12X
17.5%
20.8%
35%
AGC
Corporation
Better Worse
Better Worse
Better Worse
Better Worse
Better Worse
Better Worse
Better Worse
Better Worse
Better Worse
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
3. Multiple Choice Questions (3 points each):
Luca Computer Company
Balance Sheet
December 31, 2019
Assets:
Cash
40,000
AR
60,000
Inventory
90,000
Plant & Equipment
220,000
Total Assets
410,000
Liabilities & Stockholders’ Equity:
AP
60,000
Accrued Liabilities
40,000
LT Debt
130,000
Common Stock
60,000
PIC in excess of par, Com stk. 20,000
Retained Earnings
100,000
Total Liabilities and S.E.
410,000
Luca Computer Company
Income Statement
For the year ended December 31, 2019
Sales (all on credit)
COGS
Gross Profit
S & A Exp.
Depreciation Exp.
EBIT
Int. Exp.
EBT
Tax Exp. (34%)
EAT
720,000
500,000
220,000
20,000
40,000
160,000
16,000
144,000
48,960
95,040
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
3. From the preceding statements, please circle the best answer in the following multiple-choice
questions.
1. Return of Assets for Jackson is approximately:
a. 15%
b. 23%
c. 29%
d. 35%
2. Times interest earned is:
a. 4.5X
b. 9X
c. 11X
d. 10X
Current ratio is:
a. 1.9:1
b. 1.625:1
c. 1.5:1
d. 3.2:1
3. Debt to Asset ratio is:
a. 56.1%
b. 47.22%
c. 33.33%
d. None of the above
4. What is Jackson’s Total Asset Turnover:
a. 4.5X
b. 3.6X
c. 2X
d. 1.8X
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
4.
BSC Hospital
Balance Sheet
December 31, 2019
Assets:
Current Assets:
Cash
$14,202
Accounts Receivable, net
5,918
Medical Supplies Inventory
1,211
Prepaid Assets
1,429
Total Current Assets
$22,760
Long-Term Assets:
Equipment(net)
33,769
Other Assets
901
Total Assets
$57,430
Liabilities:
Current Liabilities:
Accounts Payable
$1,910
Accrued Compensation/benefits
2,543
Other accrued liabilities
1,843
Current portion of long-term debt
2,064
Total Current Liabilities
$8,360
Long-Term debt
21,640
Total Liabilities
$30,000
Owner’s Equity:
John Doe, Capital
27,430
Total Liabilities & Owner Equity
$57,430
BSC Hospital
Income Statement
For the Year Ended, December 31, 2019
Patient Service Revenue
$66,962
Provision for Bad Debt
(2,457)
Net Patient Service Revenue
64,505
Operating Expenses:
Personnel Expense
$21,707
Medical Supplies Expense
15,047
Other Operating Expense
9,721
Depreciation Expense
2,625
Total Operating Expenses
(49,100)
Income From Operations
15,405
Other Revenue and Expenses:
Interest Revenue
159
Interest Expense
(1,322)
Net Income
$14,242
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
Problem #4 continued…
Please calculate the following ratios, compare to the industry average and write a short conclusion on
how BSC Company is doing compared to the industry:
Return on Assets (ROA)
Current Ratio
Days Cash on Hand
Average Collection Period
Debt Ratio
Debt to Equity ratio
Times Interest Earned
Fixed Asset Turnover
Industry Average
22.5%
2.0
85 days
20 days
40%
.67
5.0
1.4
Test #5 – Financial Analysis – Ch. 17 – Brockport State College – Final Test
Dr. Sam Lanzafame
Name_____________________________
Directions: Please do all five questions on this exam. Each question will be worth 20 points.
5. Please perform Vertical and Horizontal Analysis on the following company and when done,
please include a paragraph on your findings.
KuKu Corporation
Comparative Balance Sheets
Year-End, 2020
Assets:
Current Assets:
Cash
$ 30,000
Marketable Securities
10,000
Accounts Receivable
170,000
Inventory
160,000
Prepaid Assets
30,000
Total Current Assets
Investments (long-term)
Plant & equipment
1,000,000
less Accumulated Depreciation
(550,000)
Total Assets
Liabilities:
Current Liabilities:
Accounts Payable
$ 45,000
Notes Payable
100000
Accrued Payables
35000
Total Current Liabilities
$ 180,000
Long-Term Liabilities:
Bonds Payable, 2025
40,000
Total Liabilities
Stockholders’ Equity:
Preferred Stock, $100 par value
50,000
Common Stock, $1 par value
100,000
Capital paid in excess of par
250,000
Retained Earnings
250,000
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
Year-End, 2021
$ 40,000
10,000
200,000
180,000
20,000
$ 400,000
20,000
1,100,000
(600,000)
450,000
$ 870,000
$ 450,000
50,000
500,000
$ 1,000,000
$ 80,000
100,000
30,000
$ 210,000
90,000
$ 220,000
$ 300,000
50,000
100,000
250,000
300,000
650,000
$ 870,000
700,000
$ 1,000,000