Chapter 13: Q16DQ (page 614)
Refer to Samsung’s financial statements in Appendix A. Compute its debt ratio as of December 31, 2015, and December 31, 2014.
2015:0.26
2014:0.27
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Which of the following items athrough iare part of financial reporting but are notincluded as part of general-purpose financial statements?
a. Income statement
b. Balance sheet
c. Prospectus
d. Financial statement notes
e. Company news releases performance
f. Statement of cash flows
g. Stock price information and analysis
h. Statement of shareholders’ equity
i. Management discussion and analysis of financial
Why is working capital given special attention in the process of analyzing balance sheets?
Selected year-end financial statements of Overton Corporation follow. (All sales were on credit; selected balance sheet amounts at December 31, 2016, were inventory, \(17,400; total assets, \)94,900; common stock, \(35,500; and retained earnings, \)18,800.)
OVERTON CORPORATION
Income Statement
For Year Ended December 31, 2017
Sales . . . . . . . . . . . . . . . . . \(315,500
Cost of goods sold . . . . . . 236,100
Gross profit . . . . . . . . . . . . 79,400
Operating expenses . . . . . 49,200
Interest expense . . . . . . . . 2,200
Income before taxes . . . . . 28,000
Income taxes . . . . . . . . . . . 4,200
Net income . . . . . . . . . . . . \) 23,800
OVERTON CORPORATION
Balance Sheet
December 31, 2017
Assets Liabilities and Equity
Cash . . . . . . . . . . . . . . . . . . . . . . . \( 6,100 Accounts payable . . . . . . . . . . . . . . . . . . . . \) 11,500
Short-term investments . . . . . . . . 6,900 Accrued wages payable . . . . . . . . . . . . . . . 3,300
Accounts receivable, net . . . . . . . 12,100 Income taxes payable . . . . . . . . . . . . . . . . 2,600
Notes receivable (trade)* . . . . . . . 3,000 Long-term note payable, secured
Merchandise inventory . . . . . . . . . 13,500 by mortgage on plant assets . . . . . . . . . 30,000
Prepaid expenses . . . . . . . . . . . . . 2,000 Common stock, \(5 par value . . . . . . . . . . . 35,000
Plant assets, net . . . . . . . . . . . . . . 73,900 Retained earnings . . . . . . . . . . . . . . . . . . . 35,100
Total assets . . . . . . . . . . . . . . . . . . \)117,500 Total liabilities and equity . . . . . . . . . . . . . . $117,500
* These are short-term notes receivable arising from customer (trade) sales.
Required
Compute the following:
(1) current ratio,
Round to one decimal place; for part 6, round to two decimals.
Compute trend percents for the following accounts, using 2013 as the base year (round the percents to whole numbers). State whether the situation as revealed by the trends appears to be favorable or unfavorable for each account.
2017 | 2016 | 2015 | 2014 | 2013 | |
Sales | \(282,880 | \)270,800 | \(252,600 | \)234,560 | $150,000 |
Cost of goods sold | 128,200 | 122,080 | 115,280 | 106,440 | 67,000 |
Accounts receivable | 18,100 | 17,300 | 16,400 | 15,200 | 9,000 |
Refer to Google’s financial statements in Appendix A to compute its equity ratio as of December 31, 2015, and December 31, 2014.
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