Develop a minimum 700-word examination of the financial statements based on case study.
Assignment Content
1.) Purpose of Assignment
This week’s focus is on the preparation of financial reports for internal users, such as managers. This case study applies the concepts of managerial accounting, through comparative and ratio analysis, and requires students to identify financial data needed by managers for decision making.
Resources
o Ratio Analysis Grading Guide
o Generally Accepted Accounting Principles (GAAP), U.S. Securities and Exchange Committee (SEC)
o Scenario Worksheet Tutorial help on Excel and Word functions can be found on the Microsoft Office website. There are also additional tutorials via the web offering support for Office products.
Assignment Steps
2.) Scenario: You are a loan officer for White Sands Bank of Taos. Paul Jason, president of P. Jason Corporation, has just left your office. He is interested in an 8-year loan to expand the company’s operations. The borrowed funds would be used to purchase new equipment. As evidence of the company’s debt-worthiness, Jason provided you with facts (available in the ATTACHED Scenario Worksheet). Jason is a very insistent (some would say pushy) man. When you told him you would need additional information before making your decision, he acted offended and said, “What more could you possibly want to know?” You responded you would, at minimum, need complete, audited financial statements.
3.) Develop a minimum 700-word examination of the financial statements and include the following (I have also attached 2 slideshow that has information and definitions to help with the assignment):
o Explain why you would want the financial statements to be audited.
o Discuss the implications of the ratios provided for the lending decision you are to make. That is, does the information paint a favorable picture? Are these ratios relevant to the decision? State why or why not.
o Evaluate trends in the performance of P. Jason Corporation. Identify each performance measure as favorable or unfavorable and explain the significance of each.
o List three other ratios you would want to calculate for P. Jason Corporation, and in your own words explain in detail why you would use each.
o As the loan officer, what else would you do to gain a better understanding of Paul Jason’s, and the Corporation’s financial picture and why?
o Based on your analysis of P. Jason Corporation, will you recommend approval for the requested loan? Provide specific details to support your decision.
Format the assignment according to APA guidelines. In-text Citations and references on reference page when provided.
|
Title ABC/ 1 23 Version X |
1 |
|
Scenario – Week 3 Individual Assignment ACC/561 Version 7 |
University of Phoenix Material
Scenario:
You are a loan officer for White Sands Bank of Taos. Paul Jason, president of P. Jason Corporation, has just left your office. He is interested in an 8-year loan to expand the company’s operations. The borrowed funds would be used to purchase new equipment. As evidence of the company’s debt-worthiness, Jason provided you with the following facts:
|
|
2017 |
2016 |
|
Current Ratio |
3.1 |
2.1 |
|
Asset Turnover |
2.8 |
2.2 |
|
Up 32% |
Down 8% |
|
|
Earnings per Share |
$3.30 |
$2.50 |
Jason is a very insistent (some would say pushy) man. When you told him you would need additional information before making your decision, he acted offended and said, “What more could you possibly want to know?” You responded you would, at minimum, need complete, audited financial statements.
Copyright © XXXX by University of Phoenix. All rights reserved.
Copyright © 2017 by University of Phoenix. All rights reserved.
Accounting: Tools for Business Decision Making
Sixth Edition
Kimmel ● Weygandt ● Kieso
Chapter 14
Managerial Accounting
This slide deck contains animations. Please disable animations if they cause issues with your device.
Chapter Outline:
Learning Objectives
Identify the features of managerial accounting and the functions of management.
Describe the classes of manufacturing costs and the differences between product and period costs.
Demonstrate how to compute cost of goods manufactured and prepare financial statements for a manufacturer.
Discuss trends in managerial accounting.
2
Copyright ©2016 John Wiley & Sons, Inc.
L O 1: Identify the Features of Managerial Accounting and the Functions of Management
Managerial accounting provides economic and financial information for managers and other internal users.
3
Copyright ©2016 John Wiley & Sons, Inc.
Comparing Managerial and Financial Accounting (1 of 2)
Feature Financial Accounting Managerial Accounting
Primary Users of Reports External users: stockholders,
creditors, and regulators. Internal users: officers and managers..
Types and Frequency of Reports Financial statements.
Quarterly and annually. Internal reports.
As frequently as needed.
Purpose of Reports General-purpose. Special-purpose for
specific decisions.
4
Copyright ©2016 John Wiley & Sons, Inc.
Comparing Managerial and Financial Accounting (2 of 2)
Feature Financial Accounting Managerial Accounting
Content of Reports Pertains to business as a whole. Highly aggregated (condensed).
Limited to double-entry accounting and cost data.
Generally accepted accounting principles. Pertains to subunits of the business.
Very detailed.
Extends beyond double-entry accounting to any relevant data.
Standard is relevance to decisions.
Verification Process Audited by CPA. No independent audits.
5
Copyright ©2016 John Wiley & Sons, Inc.
Management Functions
Planning Directing Controlling
Maximize short-term profit and market share.
Commit to environmental protection and social programs.
Add value to the business. Coordinate diverse activities and human resources.
Implement planned objectives.
Provide incentives to motivate employees
Hire and train employees.
Produce a smooth-running operation. Keeping activities on track.
Determine whether goals are met.
Decide changes needed to get back on track.
May use an informal or formal system of evaluations.
6
Copyright ©2016 John Wiley & Sons, Inc.
6
Management Insight: Louis Vuitton (1 of 2)
Even the Best Have to Get Better
Luxury-goods manufacturers used to consider stockouts to be a good thing. But recently, Louis Vuitton, a French manufacturer of high-end handbags, wallets, and suitcases, changed its attitude. The company adopted “lean” processes used by car manufacturers and electronics companies to speed up production of “hot” products. Work is done by flexible teams, with jobs organized based on how long a task takes. By reducing wasted time and eliminating bottlenecks, what used to take 20 to 30 workers eight days to do now takes only 6 to 12 workers one day.
Other efforts included organizing 10-person factory teams into U-shaped clusters. This arrangement freed up floor space, allowing Louis Vuitton to hire 300 additional employees. The company also selectively employs robots to bring items to human workers, saving valuable time. In addition, computer programs are now used to identify flaws in leather skins, enabling the company to identify the best way to cut pieces from the leather to increase quality and minimize waste.
7
Copyright ©2016 John Wiley & Sons, Inc.
Management Insight: Louis Vuitton (2 of 2)
Finally, Louis Vuitton stores around the world feed sales information to the company’s headquarters in France. Production is then adjusted accordingly to ensure that would-be buyers aren’t left empty-handed. With these new production processes, Louis Vuitton is already seeing improved results—returns of some products are down by two-thirds.
Sources: Christina Passariello, “Louis Vuitton Tries Modern Methods on Factory Lines,” Wall Street Journal (October 9, 2006); and Christina Passariello, “At Vuitton, Growth in Small Batches,” Wall Street Journal (June 27, 2011).
What are some of the steps that this company has taken in order to ensure that production meets demand? (Go to WileyPLUS for this answer and additional questions.)
© Camilia Wisbauer/iStockphoto
8
Copyright ©2016 John Wiley & Sons, Inc.
Organizational Structure
Organization charts show the interrelationships of activities and the delegation of authority and responsibility within the company.
9
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 1: Managerial Accounting Overview (1 of 2)
Indicate whether each of the following statements is true or false.
Managerial accountants have a single role within an organization, collecting and reporting costs to management.
False
Financial accounting reports are general-purpose and intended for external users.
True
Managerial accounting reports are special-purpose and issued as frequently as needed.
True
10
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 1: Managerial Accounting Overview (2 of 2)
Indicate whether each of the following statements is true or false.
Managers’ activities and responsibilities can be classified into three broad functions: cost accounting, budgeting, and internal control.
False
Managerial accounting reports must now comply with generally accepted accounting principles (G A A P).
False
11
Copyright ©2016 John Wiley & Sons, Inc.
L O 2: Describe the Classes of Manufacturing Costs and the Differences Between Product and Period Costs
Managers should ask questions such as the following.
What costs are involved in making a product or providing a service?
If we decrease production volume, will costs decrease?
What impact will automation have on total costs?
How can we best control costs?
12
Copyright ©2016 John Wiley & Sons, Inc.
Manufacturing Costs (1 of 5)
Manufacturing consists of activities and processes that convert raw materials into finished goods.
13
Copyright ©2016 John Wiley & Sons, Inc.
Manufacturing Costs (2 of 5)
Direct Materials
Raw Materials
Basic materials and parts used in manufacturing process.
Direct Materials
Raw materials that can be physically and directly associated with the finished product during the manufacturing process.
14
Copyright ©2016 John Wiley & Sons, Inc.
Manufacturing Costs (3 of 5)
Direct Materials
Indirect Materials
Not physically part of the finished product or
they are an impractical to trace to the finished product because their physical association with the finished product is too small in terms of cost.
Considered part of manufacturing overhead.
15
Copyright ©2016 John Wiley & Sons, Inc.
Manufacturing Costs (4 of 5)
Direct Labor
Work of factory employees that can be physically and directly associated with converting raw materials into finished goods.
Indirect Labor
Work of factory employees that has no physical association with the finished product or for which it is impractical to trace costs to the goods produced.
16
Copyright ©2016 John Wiley & Sons, Inc.
Manufacturing Costs (5 of 5)
Manufacturing Overhead
Costs that are indirectly associated with manufacturing the finished product.
Includes all manufacturing costs except direct materials and direct labor.
Also called factory overhead, indirect manufacturing costs, or burden.
17
Copyright ©2016 John Wiley & Sons, Inc.
Management Insight: Whirlpool (1 of 2)
Why Manufacturing Matters for U.S. Workers
Prior to 2010, U.S. manufacturing employment fell at an average rate of 0.1% per year for 60 years. At the same time, U.S. factory output increased by an average rate of 3.4%. As manufacturers relied more heavily on automation, the number of people they needed declined. However, factory jobs are important because the average hourly wage of a factory worker is $22, twice the average wage of employees in the service sector. Fortunately, manufacturing jobs in the United States increased by 1.2% in 2010, and they were forecast to continue to increase through at least 2015. Why? Because companies like Whirlpool, Caterpillar, and Dow are building huge new plants in the United States to replace old, inefficient U.S. facilities. For many products that are ultimately sold in the United States, it makes more sense to produce them domestically and save on the shipping costs. In addition, these efficient new plants, combined with an experienced workforce, will make it possible to compete with manufacturers in other countries, thereby increasing export potential.
Sources: Bob Tita, “Whirlpool to Invest in Tennessee Plant,” Wall Street Journal Online (September 1, 2010); and James R. Hagerty, “U.S. Factories Buck Decline,” Wall Street Journal Online (January 19, 2011).
18
Copyright ©2016 John Wiley & Sons, Inc.
Management Insight: Whirlpool (2 of 2)
In what ways does the shift to automated factories change the amount and composition of product costs? (Go to WileyPLUS for this answer and additional questions.)
bikeriderlondon/Shutterstock
19
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (1 of 6)
Product Costs
Components:
Direct materials
Direct labor
Manufacturing overhead
Costs that are an integral part of producing the product.
Recorded in “inventory” account.
Not an expense (C O G S) until the goods are sold.
20
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (2 of 6)
Period Costs
Charged to expense as incurred.
Non-manufacturing costs.
Includes all selling and administrative expenses.
21
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (3 of 6)
22
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (4 of 6)
Illustration: Suppose you started your own snowboard factory, KRT Boards. Here are some of the costs that your snowboard factory would incur. Assign the following costs:
Product Costs
Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs
Material cost ($30) per board X Blank Blank Blank
Labor costs ($40) per board Blank X Blank Blank
Depreciation on factory equipment ($25,000 per year) Blank Blank X Blank
23
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (5 of 6)
Cost Item Direct Materials Direct Labor Manufacturing Overhead Period Costs
Property taxes on factory building ($6,000 per year) Blank Blank X Blank
Advertising costs ($60,000 per year) Blank Blank Blank X
Sales commissions ($20 per board) Blank Blank Blank X
Maintenance salaries (factory facilities, $45,000 per year) Blank Blank X Blank
Salary of plant manager ($70,000 per year) Blank Blank X Blank
Cost of shipping boards ($8 per board) Blank Blank Blank X
24
Copyright ©2016 John Wiley & Sons, Inc.
Product Versus Period Costs (6 of 6)
If K R T Boards produces 10,000 snowboards the first year, what would be the total manufacturing costs?
Cost Number and Item Manufacturing Cost
Material cost ($30 × 10,000) $300,000
Labor cost ($40 × 10,000) 400,000
Depreciation on factory equipment 25,000
Property taxes on factory building 6,000
Maintenance salaries (factory facilities) 45,000
Salary of plant manager 70,000
Total manufacturing costs $846,000
25
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 2: Managerial Cost Concepts
A bicycle company has these costs: tires, salaries of employees who put tires on the wheels, factory depreciation, advertising expenditures, lubricants, spokes, salary of factory manager, salary of accountant, handlebars, and salaries of factory maintenance employees. Classify each cost as direct materials, direct labor, overhead, or a period cost.
Direct Materials Direct Labor Overhead
Tires.
Spokes.
Handlebars. Salaries of employees who put tires on the wheels. Factory depreciation.
Lubricants
Factory manager salary.
Factory maintenance employees salary.
Advertising expenditures and salary of accountant are period costs.
26
Copyright ©2016 John Wiley & Sons, Inc.
L O 3: Demonstrate How to Compute Cost of Goods Manufactured and Prepare Financial Statements for a Manufacturer
Income Statement
Under a periodic inventory system, the income statements of a merchandiser and a manufacturer differ in the cost of goods sold section.
“C O G S”
27
Copyright ©2016 John Wiley & Sons, Inc.
Income Statement (1 of 2)
▼ Helpful hint
Assume a periodic inventory system in this illustration.
28
Copyright ©2016 John Wiley & Sons, Inc.
Income Statement (2 of 2)
Cost of goods sold sections of merchandising and manufacturing income statements
29
Copyright ©2016 John Wiley & Sons, Inc.
Cost of Goods Manufactured (1 of 2)
Total Manufacturing Costs – sum of direct material costs, direct labor costs, and manufacturing overhead in the current year.
Total Work in Process – (1) cost of beginning work in process and (2) total manufacturing costs for the current period.
30
Copyright ©2016 John Wiley & Sons, Inc.
Cost of Goods Manufactured (2 of 2)
31
Copyright ©2016 John Wiley & Sons, Inc.
Balance Sheet (1 of 2)
Inventory accounts for a manufacturer
The balance sheet for a merchandising company shows just one category of inventory.
32
Copyright ©2016 John Wiley & Sons, Inc.
Balance Sheet (2 of 2)
Current assets sections of merchandising and manufacturing balance sheets
33
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 3: Cost of Goods Manufactured (1 of 2)
The following information is available for Keystone Company.
Blank Blank March 1 March 31
Raw materials inventory Blank $12,000 $10,000
Work in process inventory Blank 2,500 4,000
Materials purchased in March $ 90,000 Blank Blank
Direct labor in March 75,000 Blank Blank
Manufacturing overhead in March 220,000 Blank Blank
Prepare the cost of goods manufactured schedule for the month of March 2017.
34
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 3: Cost of Goods Manufactured (2 of 2)
35
Copyright ©2016 John Wiley & Sons, Inc.
L O 4: Discuss Trends in Managerial Accounting
Service Industries
Much of the U.S. economy has shifted toward an emphasis on providing services rather than goods.
Over 50% of U.S. workers are now employed by service companies.
Most of the techniques learned for manufacturing firms are applicable to service companies.
36
Copyright ©2016 John Wiley & Sons, Inc.
Service Company Insight: Allegiant Airlines (1 of 2)
Low Fares but Decent Profits
When other airlines were cutting flight service due to recession, Allegiant Airlines increased capacity by 21%. Sounds crazy, doesn’t it? But it must know something because while the other airlines were losing money, it was generating profits. In fact, it often has the industry’s highest profit margins. Consider also that its average one-way fare is only $83. So how does it make money? As a low-budget airline, it focuses on controlling costs.
Allegiant purchases used planes for $3 million each rather than new planes for $40 million. It flies out of small towns, so wages are low and competition is nonexistent. It minimizes hotel costs by having its flight crews finish their day in their home cities. The company also only flies a route if its 150-passenger planes are nearly full (it averages about 90% of capacity). The bottom line is that Allegiant knows its costs to the penny. Knowing what your costs are might not be glamorous, but it sure beats losing money.
Sources: Susan Carey, “For Allegiant, Getaways Mean Profits,” Wall Street Journal Online (February 18, 2009); and Scott Mayerowitz, “Tiny Allegiant Air Thrives on Low Costs, High Fees,” bigstory.ap.org (June 28, 2013).
37
Copyright ©2016 John Wiley & Sons, Inc.
Service Company Insight: Allegiant Airlines (2 of 2)
What are some of the line items that would appear in the cost of services performed schedule of an airline? (Go to WileyPLUS for this answer and additional questions.)
© Stephen Strathdee/iStockphoto
38
Copyright ©2016 John Wiley & Sons, Inc.
Focus On the Value Chain (1 of 4)
Refers to all business processes associated with providing a product or service.
For a manufacturing firm these include the following:
39
Copyright ©2016 John Wiley & Sons, Inc.
Focus On the Value Chain (2 of 4)
Just-In-Time (J I T) Inventory Methods
Inventory system in which goods are manufactured or purchased just in time for sale.
Total Quality Management (T Q M)
Reduce defects in finished products, with the goal of zero defects.
40
Copyright ©2016 John Wiley & Sons, Inc.
Focus On the Value Chain (3 of 4)
Theory of Constraints
Constraints (“bottlenecks” ) limit the company’s potential profitability.
A specific approach to identify and manage these constraints in order to achieve company goals.
Enterprise Resource Planning (E R P)
Software programs designed to manage all major business processes.
41
Copyright ©2016 John Wiley & Sons, Inc.
Focus On the Value Chain (4 of 4)
Activity-Based Costing (A B C)
Allocates overhead based on use of activities.
Results in more accurate product costing and scrutiny of all activities in the value chain.
42
Copyright ©2016 John Wiley & Sons, Inc.
Balanced Scorecard
Evaluates operations in an integrated fashion.
Uses both financial and non-financial measures.
Links performance to overall company objectives.
43
Copyright ©2016 John Wiley & Sons, Inc.
Business Ethics (1 of 3)
All employees are expected to act ethically.
Many organizations have codes of business ethics.
Past financial frauds:
Enron,
Global Crossing,
WorldCom
44
Copyright ©2016 John Wiley & Sons, Inc.
Business Ethics (2 of 3)
Creating Proper Incentives
Systems and controls sometimes create incentives for managers to take unethical actions.
Controls need to be effective and realistic.
45
Copyright ©2016 John Wiley & Sons, Inc.
Business Ethics (3 of 3)
Code of Ethical Standards
Sarbanes-Oxley Act (S O X)
Clarifies management’s responsibilities.
Requires certifications by C E O and C F O.
Selection criteria for Board of Directors and Audit Committee.
Substantially increased penalties for misconduct.
46
Copyright ©2016 John Wiley & Sons, Inc.
Corporate Social Responsibility
Considers a company’s efforts to employ sustainable business practices with regard to its employees, society, and the environment.
Is sometimes referred to as the triple bottom line because it evaluates a company’s performance with regard to people, planet, and profit.
Recent reports indicate that over 50% of the 500 largest U.S. companies provide sustainability reports.
47
Copyright ©2016 John Wiley & Sons, Inc.
People, Planet, and Profit Insight: Phantom Tac (1 of 2)
People Matter
Many clothing factories in developing countries are known for unsafe buildings, poor working conditions, and wage and labor violations. One of the owners of Phantom Tac, a clothing manufacturer in Bangladesh, did make efforts to develop sustainable business practices. This owner, David Mayor, provided funding for a training program for female workers. He also developed a website to educate customers about the workers’ conditions. But Phantom Tac also had to make a profit. Things got tight when one of its customers canceled orders because Phantom Tac failed a social compliance audit. The company had to quit funding the training program and the website. Recently, Bangladesh’s textile industry has seen some significant improvements in working conditions and safety standards. As Brad Adams, Asia director of Human Rights Watch, notes, “The (Dhaka) government has belatedly begun to register unions, which is an important first step, but it now needs to ensure that factory owners stop persecuting their leaders and actually allow them to function.”
48
Copyright ©2016 John Wiley & Sons, Inc.
People, Planet, and Profit Insight: Phantom Tac (2 of 2)
Sources: Jim Yardley, “Clothing Brands Sidestep Blame for Safety Lapses,” The New York Times Online (December 30, 2013); and Palash Ghosh, “Despite Low Pay, Poor Work Conditions, Garment Factories Empowering Millions of Bangladeshi Women,” International Business Times (March 25, 2014).
What are some of the common problems for many clothing factories in developing countries? (Go to WileyPLUS for this answer and additional questions.)
Geanina Bechea/Shutterstock
49
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (1 of 6)
Match the descriptions that follow with the corresponding terms.
______ All activities associated with providing a product or performing service.
______ A method of allocating overhead based on each product’s use of activities in making the product.
______ Systems implemented to reduce defects in finished products with the goal of achieving zero defects.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
50
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (2 of 6)
Match the descriptions that follow with the corresponding terms.
g All activities associated with providing a product or performing service.
a A method of allocating overhead based on each product’s use of activities in making the product.
e Systems implemented to reduce defects in finished products with the goal of achieving zero defects.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
51
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (3 of 6)
Match the descriptions that follow with the corresponding terms.
______ A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company’s operations in an integrated fashion.
______ Inventory system in which goods are manufactured or purchased just as they are needed for use.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
52
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (4 of 6)
Match the descriptions that follow with the corresponding terms.
b A performance-measurement approach that uses both financial and nonfinancial measures, tied to company objectives, to evaluate a company’s operations in an integrated fashion.
d Inventory system in which goods are manufactured or purchased just as they are needed for use.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
53
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (5 of 6)
Match the descriptions that follow with the corresponding terms.
______ A company’s efforts to employ sustainable business practices with regards to its employees, society, and the environment.
______ Inventory system in which goods are manufactured or purchased just as they are needed for use.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
54
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 4: Trends in Managerial Accounting (6 of 6)
Match the descriptions that follow with the corresponding terms.
c A company’s efforts to employ sustainable business practices with regards to its employees, society, and the environment.
f Inventory system in which goods are manufactured or purchased just as they are needed for use.
Terms:
a. Activity-based costing
b. Balanced scorecard
c. Corporate social responsibility
d. Just-in-time (J I T) inventory
e. Total quality management (T Q M)
f. Statement of Ethical Professional Practice
g. Value chain
55
Copyright ©2016 John Wiley & Sons, Inc.
Copyright
Copyright © 2016 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
56
Copyright ©2016 John Wiley & Sons, Inc.
56
$846,000
Accounting: Tools for Business Decision Making
Sixth Edition
Kimmel ● Weygandt ● Kieso
Chapter 13
Financial Analysis: The Big Picture
This slide deck contains animations. Please disable animations if they cause issues with your device.
Chapter Outline:
Learning Objectives
Apply the concepts of sustainable income and quality of earnings.
Apply horizontal analysis and vertical analysis.
Analyze a company’s performance using ratio analysis.
2
Copyright ©2016 John Wiley & Sons, Inc.
L O 1: Apply the Concepts of Sustainable Income and Quality of Earnings
Sustainable Income
The most likely level of income to be obtained by a company in the future.
Unusual Items
Separately identified on the income statement.
Discontinued operations.
Other comprehensive income.
These “irregular” items are reported net of income tax.
3
Copyright ©2016 John Wiley & Sons, Inc.
Sustainable Income (1 of 4)
4
Copyright ©2016 John Wiley & Sons, Inc.
Sustainable Income (2 of 4)
Discontinued Operations
(a) Disposal of a significant component of a business.
(b) Income statement should report a gain (or loss) from discontinued operations, net of tax.
5
Copyright ©2016 John Wiley & Sons, Inc.
Discontinued Operations (1 of 2)
Illustration: Assume that during 2017 Acro Energy Inc. has income before income taxes of $800,000. During 2017, Acro discontinued and sold its unprofitable chemical division. The loss in 2017 from chemical operations (net of $60,000 taxes) was $140,000. The loss on disposal of the chemical division (net of $30,000 taxes) was $70,000. Assuming a 30% tax rate on income.
Prepare Acro’s statement of comprehensive income for the year ended December 31, 2017.
6
Copyright ©2016 John Wiley & Sons, Inc.
Discontinued Operations (2 of 2)
7
Copyright ©2016 John Wiley & Sons, Inc.
Investor Insight (1 of 3)
What Does “Non-Recurring” Really Mean
Many companies incur restructuring charges as they attempt to reduce costs. They often label these items in the income statement as “non-recurring” charges, to suggest that they are isolated events, unlikely to occur in future periods. The question for analysts is, are these costs really one-time, “nonrecurring events” or do they reflect problems that the company will be facing for many periods in the future? If they are one-time events, then they can be largely ignored when trying to predict future earnings. But, some companies report “one-time” restructuring charges over and over again. For example, Procter & Gamble reported a restructuring charge in 12 consecutive quarters, and Motorola had “special” charges in 14 consecutive quarters. On the other hand, other companies have a restructuring charge only once in a 5- or 10-year period. There appears to be no substitute for careful analysis of the numbers that comprise net income.
8
Copyright ©2016 John Wiley & Sons, Inc.
Sustainable Income (3 of 4)
Comprehensive Income
All changes in stockholders’ equity except those resulting from
investments by stockholders and
distributions to stockholders.
Certain gains and losses bypass net income and instead are reported as direct adjustments to stockholders’ equity.
Example – Unrealized gain or loss on Available-for-sale securities.
9
Copyright ©2016 John Wiley & Sons, Inc.
Comprehensive Income (1 of 5)
Illustration of Comprehensive Income
Accounting standards require companies to adjust most investments in stocks and bonds up or down to their market value at the end of each accounting period.
Illustration: During 2017 Stassi Company purchased IBM stock for $10,000 as an investment. At the end of 2017 Stassi was still holding the investment, but the stock’s market value was now $8,000.
How should Stassi account for the $2,000 unrealized loss?
10
Copyright ©2016 John Wiley & Sons, Inc.
Comprehensive Income (2 of 5)
Illustration of Comprehensive Income
How should Stassi account for the $2,000 unrealized loss?
Answer: Depends on whether Stassi classifies the IBM stock as a
Trading security or an → Unrealized gains and losses (Income Statement)
Available for-sale security. → Unrealized gains and losses (Comprehensive Income – Stockholders’ Equity)
11
Copyright ©2016 John Wiley & Sons, Inc.
Comprehensive Income (3 of 5)
Format One
Combined statement of income and comprehensive income.
12
Copyright ©2016 John Wiley & Sons, Inc.
Comprehensive Income (4 of 5)
Format Two
Separate component of Stockholders’ Equity.
13
Copyright ©2016 John Wiley & Sons, Inc.
Comprehensive Income (5 of 5)
14
Copyright ©2016 John Wiley & Sons, Inc.
Sustainable Income (4 of 4)
Changes in Accounting Principle
Principle used in the current year is different from one used in the preceding year.
Example – change from F I F O to average cost.
Permissible when management can show new principle is preferable.
Most changes are reported retroactively.
15
Copyright ©2016 John Wiley & Sons, Inc.
Investor Insight: United Parcel Service (U P S)
More Frequent Ups and Downs
In the past, U.S. companies used a method to account for their pension plans that smoothed out the gains and losses on their pension portfolios by spreading gains and losses over multiple years. Many felt that this approach was beneficial because it reduced the volatility of reported net income. However, recently some companies have opted to adopt a method that comes closer to recognizing gains and losses in the period in which they occur. Some of the companies that have adopted this approach are United Parcel Service (U P S), Honeywell International, IBM, AT&T, and Verizon Communications. The C F O at U P S said he favored the new approach because “events that occurred in prior years will no longer distort current-year results. It will result in better transparency by eliminating the noise of past plan performance.” When U P S switched, it resulted in a charge of $827 million from the change in accounting principle.
Source: Bob Sechler and Doug Cameron, “U P S Alters Pension-Plan Accounting,” Wall Street Journal (January 30, 2012).
16
Copyright ©2016 John Wiley & Sons, Inc.
Quality of Earnings (1 of 3)
A company that has a high quality of earnings provides full and transparent information that will not confuse or mislead users of the financial statements.
Recent accounting scandals suggest that some companies are spending too much time managing their income and not enough time managing their business.
17
Copyright ©2016 John Wiley & Sons, Inc.
Quality of Earnings (2 of 3)
Alternative Accounting Methods
Variations among companies in the application of G A A P may hamper comparability and reduce quality of earnings (F I F O vs. L I F O).
Pro Forma Income
Usually excludes items that are unusual or nonrecurring.
Some companies have abused the flexibility that pro forma numbers allow to put their companies in a more favorable light.
18
Copyright ©2016 John Wiley & Sons, Inc.
Quality of Earnings (3 of 3)
Improper Recognition
Some managers have felt pressure to continually increase earnings.
Abuses include:
Improper recognition of revenue (channel stuffing).
Improper capitalization of operating expenses (WorldCom).
Failure to report all liabilities (Enron).
19
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 1: Unusual Items (1 of 2)
In its proposed 2017 income statement, AIR Corporation reports income before income taxes $400,000, unrealized gain on available-for-sale securities $100,000, income taxes $120,000 (not including unusual items), loss from operation of discontinued flower division $50,000, and loss on disposal of discontinued flower division $90,000. The income tax rate is 30%.
Prepare a correct statement of comprehensive income, beginning with “Income before income taxes.”
20
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 1: Unusual Items (2 of 2)
21
Copyright ©2016 John Wiley & Sons, Inc.
L O 2: Apply Horizontal Analysis and Vertical Analysis
Analyzing financial statements involves:
Comparison Bases
Intracompany
Intercompany
Industry averages
Basic Tools
Horizontal analysis
Vertical analysis
Ratio Analysis
22
Copyright ©2016 John Wiley & Sons, Inc.
Horizontal Analysis (1 of 3)
Also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.
Purpose is to determine increase or decrease that has taken place.
Commonly applied to the balance sheet and income statement.
23
Copyright ©2016 John Wiley & Sons, Inc.
Horizontal Analysis (2 of 3)
24
Copyright ©2016 John Wiley & Sons, Inc.
Horizontal Analysis (3 of 3)
25
Copyright ©2016 John Wiley & Sons, Inc.
Vertical Analysis (1 of 4)
Also called common-size analysis, is a technique that expresses each financial statement item as a percent of a base amount.
Vertical analysis is commonly applied to the balance sheet and the income statement.
26
Copyright ©2016 John Wiley & Sons, Inc.
Vertical Analysis (2 of 4)
27
Copyright ©2016 John Wiley & Sons, Inc.
Vertical Analysis (3 of 4)
28
Copyright ©2016 John Wiley & Sons, Inc.
Vertical Analysis (4 of 4)
29
Copyright ©2016 John Wiley & Sons, Inc.
Anatomy of a Fraud (1 of 2)
This final Anatomy of a Fraud box demonstrates that sometimes relationships between numbers can be used to detect fraud. Financial ratios that appear abnormal or statistical abnormalities in the numbers themselves can reveal fraud. For example, the fact that WorldCom’s line costs, as a percentage of either total expenses or revenues, differed very significantly from its competitors should have alerted people to the possibility of fraud. Or, consider the case of a bank manager, who cooperated with a group of his friends to defraud the bank’s credit card department. The manager’s friends would apply for credit cards and then run up balances of slightly less than $5,000. The bank had a policy of allowing bank personnel to write-off balances of less than $5,000 without seeking supervisor approval. The fraud was detected by applying statistical analysis based on Benford’s Law. Benford’s Law states that in a random collection of numbers, the frequency of lower digits (e.g., 1, 2, or 3) should be much higher than higher digits (e.g., 7, 8, or 9). In this case, bank auditors analyzed the first two digits of amounts written off. There was a spike at 48 and 49, which was not consistent with what would be expected if the numbers were random.
Total take: Thousands of dollars
30
Copyright ©2016 John Wiley & Sons, Inc.
Anatomy of a Fraud (2 of 2)
Total take: Thousands of dollars
The Missing Control
Independent internal verification. While it might be efficient to allow employees to write off accounts below a certain level, it is important that these write-offs be reviewed and verified periodically. Such a review would likely call attention to an employee with large amounts of write-offs, or in this case, write-offs that were frequently very close to the approval threshold.
Source: Mark J. Nigrini, “I’ve Got Your Number,” Journal of Accountancy Online (May 1999).
31
Copyright ©2016 John Wiley & Sons, Inc.
Do It! 2: Horizontal Analysis
Summary financial information for Rosepatch Company is as follows.
Blank December 31, 2017 December 31, 2016
Current assets $234,000 $180,000
Plain assets (net) 756,000 420,000
Total assets $990,000 $600,000
Compute the amount and percentage changes in 2017 using horizontal analysis, assuming 2016 is the base year.
32
Copyright ©2016 John Wiley & Sons, Inc.
L O 3: Analyze a Company’s Performance Using Ratio Analysis
Price-earnings Ratio
Reflects investors’ assessment of a company’s future earnings.
Will be higher if investors think that earnings will increase substantially in the future.
Will be lower when there is the belief that a company has poor-quality earnings.
33
Copyright ©2016 John Wiley & Sons, Inc.
Price-Earnings Ratio
Company Earnings per Share Price-Earnings Ratio
Southwest Airlines $ 1.65 19.5
Google 29.80 27.0
Apple 6.49 15.6
Skechers USA 2.74 34.0
Nike 3.05 28.7
34
Copyright ©2016 John Wiley & Sons, Inc.
Liquidity Ratios (1 of 2)
Liquidity Ratios
Working capital
Current ratio
Inventory turnover
Days in inventory
Accounts receivable turnover
Average collection period
35
Copyright ©2016 John Wiley & Sons, Inc.
Solvency Ratios (1 of 2)
Solvency Ratios
Debt to assets ratio
Times interest earned
Free cash flow
36
Copyright ©2016 John Wiley & Sons, Inc.
Profitability Ratios (1 of 2)
Profitability Ratios
Earnings per share
Price-earnings ratio
Gross profit rate
Profit margin
37
Copyright ©2016 John Wiley & Sons, Inc.
Profitability Ratios (2 of 2)
Return on assets
Asset turnover
Payout ratio
Return on common stockholders’ equity
38
Copyright ©2016 John Wiley & Sons, Inc.
Investor Insight (3 of 3)
High Ratings Can Bring Low Returns
Moody’s, Standard & Poor’s, and Fitch are three big firms that perform financial analysis on publicly traded companies and then publish ratings of the companies’ creditworthiness. Investors and lenders rely heavily on these ratings in making investment and lending decisions. Some people feel that the collapse of the financial markets was worsened by inadequate research reports and ratings provided by the financial rating agencies. Critics contend that the rating agencies were reluctant to give large companies low ratings because they feared that by offending them they would lose out on business opportunities. For example, the rating agencies gave many so-called mortgage-backed securities ratings that suggested that they were low risk. Later, many of these very securities became completely worthless. Steps have been taken to reduce the conflicts of interest that lead to these faulty ratings.
Source: Aaron Lucchetti and Judith Burns, “Moody’s CEO Warned Profit Push Posed a Risk to Quality of Ratings,” Wall Street Journal Online (October 23, 2008).
39
Copyright ©2016 John Wiley & Sons, Inc.
L O 4: Appendix 13A: Evaluate a Company Comprehensively Using Ratio Analysis
Analyzing financial statements involves:
Characteristics
Liquidity
Profitability
Solvency
Comparison Bases
Intracompany
Industry averages
Intercompany
The financial information in Illustrations 13A-1 through 13A-4 will be used to calculate Chicago’s 2014 ratios.
40
Copyright ©2016 John Wiley & Sons, Inc.
Evaluate a Company Comprehensively Using Ratio Analysis (1 of 3)
41
Copyright ©2016 John Wiley & Sons, Inc.
Evaluate a Company Comprehensively Using Ratio Analysis (2 of 3)
42
Copyright ©2016 John Wiley & Sons, Inc.
Evaluate a Company Comprehensively Using Ratio Analysis (3 of 3)
43
Copyright ©2016 John Wiley & Sons, Inc.
Ratio Analysis
Ratio analysis expresses the relationship among selected items of financial statement data.
Financial Ratio Classifications
Liquidity
Measures short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
Solvency
Measures the ability of the company to survive over a long period of time.
Profitability
Measures the income or operating success of a company for a given period of time.
44
Copyright ©2016 John Wiley & Sons, Inc.
Liquidity Ratios (2 of 2)
Measure the short-term ability of the company to pay its maturing obligations and to meet unexpected needs for cash.
Short-term creditors such as bankers and suppliers are particularly interested in assessing liquidity.
Ratios include the current ratio, the current cash debt coverage, the accounts receivables turnover, the average collection period, the inventory turnover, and days in inventory.
45
Copyright ©2016 John Wiley & Sons, Inc.
Current Ratio
Expresses the relationship of current assets to current liabilities.
What do the measures tell us?
A current ratio of .67 means that for every dollar of current liabilities, the company has $0.67 of current assets.
46
Copyright ©2016 John Wiley & Sons, Inc.
Accounts Receivable Turnover
Measures the number of times, on average, a company collects receivables during the period.
How does Chicago’s turnover compare to General Mills’s?
The turnover of 11.9 times is higher than the industry average of 11.2 times, and slightly lower than General Mills’ turnover of 12.2 times.
47
Copyright ©2016 John Wiley & Sons, Inc.
Average Collection Period
Converts the receivable turnover ratio into days.
How effective is Chicago’s credit and collection policies?
General rule – collection period should not greatly exceed the credit term period (i.e., the time allowed for payment).
48
Copyright ©2016 John Wiley & Sons, Inc.
Inventory Turnover
Measures the number of times average inventory was sold during the period.
How does Chicago’s turnover compare to General Mills’s?
The ratio of 7.5 times is higher than the industry average of 6.7 times and similar to that of General Mills.
49
Copyright ©2016 John Wiley & Sons, Inc.
Days in Inventory
Measures the average number of days inventory is held.
How does Chicago’s days compare to General Mills’s?
An average selling time of 49 days is faster than the industry average and faster than that of General Mills.
50
Copyright ©2016 John Wiley & Sons, Inc.
Solvency Ratios (2 of 2)
Measure the ability of a company to survive over a long period of time.
Debt-Paying Ability
Debt to total assets ratio
Times interest earned
Free cash flow
51
Copyright ©2016 John Wiley & Sons, Inc.
Debt to Assets Ratio
Indicates the degree of financial leveraging. Provides some indication of the company’s ability to withstand losses.
Has Chicago’s solvency improved during the year?
Yes. The ratio of 78% says that Chicago would have to liquidate 78% of its assets at their book value in order to pay off all of its debts.
52
Copyright ©2016 John Wiley & Sons, Inc.
Times Interest Earned
Also called interest coverage, indicates the company’s ability to meet interest payments as they come due.
Is Chicago able to service its’ debt?
Yes, the ratio indicates that income before interest and taxes was 5.8 times the amount needed for interest expense.
53
Copyright ©2016 John Wiley & Sons, Inc.
Free Cash Flow
Ability to pay dividends or expand operations.
Cash provided by operations was more than enough to allow Chicago to acquire additional productive assets and maintain dividend payments.
54
Copyright ©2016 John Wiley & Sons, Inc.
Profitability Ratios
Measure the income or operating success of a company for a given period of time.
55
Copyright ©2016 John Wiley & Sons, Inc.
Return on Common Stockholders’ Equity
Shows how many dollars of net income the company earned for each dollar invested by the owners.
Chicago’s 2014 rate of return on common stockholders’ equity is unusually high at 48%, considering an industry average of 19% and General Mills’s return of 25%.
56
Copyright ©2016 John Wiley & Sons, Inc.
Return on Assets (1 of 2)
Measures the overall profitability of assets in terms of the income earned on each dollar invested in assets.
Note that Chicago’s rate of return on common stockholders’ equity (48%) is substantially higher than its rate of return on assets (10%). Chicago has made effective use of leverage.
57
Copyright ©2016 John Wiley & Sons, Inc.
Profit Margin
Or rate of return on sales, is a measure of the percentage of each dollar of sales that results in net income.
High-volume (high inventory turnover) businesses such as grocery stores and pharmacy chains generally have low profit margins.
58
Copyright ©2016 John Wiley & Sons, Inc.
Asset Turnover
Measures how efficiently a company uses its assets to generate sales.
The average asset turnover for utility companies is .45, for example, while the grocery store industry has an average asset turnover of 3.49.
59
Copyright ©2016 John Wiley & Sons, Inc.
Return on Assets (2 of 2)
You can analyze the combined effects of profit margin and asset turnover on return on assets for Chicago as shown.
60
Copyright ©2016 John Wiley & Sons, Inc.
Gross Profit Rate
Indicates a company’s ability to maintain an adequate selling price above its cost of goods sold.
As an industry becomes more competitive, this ratio declines.
61
Copyright ©2016 John Wiley & Sons, Inc.
Earnings Per Share (E P S)
A measure of the net income earned on each share of common stock.
62
Copyright ©2016 John Wiley & Sons, Inc.
Price-Earnings (P-E) Ratio
Reflects investors’ assessments of a company’s future earnings.
A lower P-E ratio suggests that the market is less optimistic about Chicago cereal than about General Mills. It might also signal that its stock is underpriced.
63
Copyright ©2016 John Wiley & Sons, Inc.
Payout Ratio
Measures the percentage of earnings distributed in the form of cash dividends.
This ratio should be calculated over a longer period of time to evaluate any trends.
64
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S-L O-5: Compare Financial Statement Analysis and Income Statement Presentation Under G A A P and I F R S.
Relevant Facts
The tools of financial statement analysis covered in this chapter are universal and therefore no significant differences exist in the analysis methods used.
The accounting for changes in accounting principles and changes in accounting estimates are the same for both G A A P and I F R S.
Both G A A P and I F R S follow the same approach in reporting comprehensive income.
65
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (1 of 8)
Relevant Facts
The basic objectives of the income statement are the same under both G A A P and I F R S. A very important objective is to ensure that users of the income statement can evaluate the sustainable income of the company. Thus, both the I A S B and the F A S B are interested in distinguishing normal levels of income from unusual items in order to better predict a company’s future profitability.
The basic accounting for discontinued operations is the same under I F R S and G A A P.
66
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (2 of 8)
Looking to the Future
The F A S B and the I A S B are working on a project that would rework the structure of financial statements. Recently, the I A S B decided to require a statement of comprehensive income, similar to what was required under G A A P. In addition, another part of this project addresses the issue of how to classify various items in the income statement. A main goal of this new approach is to provide information that better represents how businesses are run. In addition, the approach draws attention away from one number—net income.
67
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (3 of 8)
I F R S Practice
The basic tools of financial analysis are the same under both G A A P and I F R S except that:
a) horizontal analysis cannot be done because the format of the statements is sometimes different.
b) analysis is different because vertical analysis cannot be done under I F R S.
c) the current ratio cannot be computed because current liabilities are often reported before current assets in I F R S statements of position.
d) None of the above.
68
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (4 of 8)
I F R S Practice
The basic tools of financial analysis are the same under both G A A P and I F R S except that:
a) horizontal analysis cannot be done because the format of the statements is sometimes different.
b) analysis is different because vertical analysis cannot be done under I F R S.
c) the current ratio cannot be computed because current liabilities are often reported before current assets in I F R S statements of position.
d) None of the above.
69
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (5 of 8)
I F R S Practice
Presentation of comprehensive income must be reported under I F R S in:
a) the statement of stockholders’ equity.
b) the income statement ending with net income.
c) the notes to the financial statements.
d) a statement of comprehensive income.
70
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (6 of 8)
I F R S Practice
Presentation of comprehensive income must be reported under I F R S in:
a) the statement of stockholders’ equity.
b) the income statement ending with net income.
c) the notes to the financial statements.
d) a statement of comprehensive income.
71
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (7 of 8)
I F R S Practice
In preparing its income statement for 2017, Parmalane assembles the following information.
Sales revenue $500,000
Cost of goods sold 300,000
Operating expenses 40,000
Loss on discontinued operations 20,000
Ignoring income taxes, what is Parmalane’s income from continuing operations for 2017 under I F R S?
a) $260,000.
b) $250,000.
c) $240,000.
d) $160,000.
72
Copyright ©2016 John Wiley & Sons, Inc.
A Look at I F R S (8 of 8)
I F R S Practice
In preparing its income statement for 2017, Parmalane assembles the following information.
Sales revenue $500,000
Cost of goods sold 300,000
Operating expenses 40,000
Loss on discontinued operations 20,000
Ignoring income taxes, what is Parmalane’s income from continuing operations for 2017 under I F R S?
a) $260,000.
b) $250,000.
c) $240,000.
d) $160,000.
73
Copyright ©2016 John Wiley & Sons, Inc.
73
Copyright
Copyright © 2016 John Wiley & Sons, Inc.
All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
74
Copyright ©2016 John Wiley & Sons, Inc.
74
$990,000
$600,000
Market Price per Share
Price-Earnings (P-E) Ratio =
Earnings per Share
Stock Price per Share
Price-Earnings (P-E) Ratio =
Earnings per Share
Current assets Current liabilities
–
Current assets
Current liabilities
Cost of goods sold
Average inventory
365days
Inventory turnover
Net credit sales
Average net accounts receivable
365days
Accounts receivable turnover
Total liabilities
Total assets
Net income + Interest expense + Income t
ax expense
Interest expense
Net cash providedCapitalCash
by operating activitiesexpendituresdivid
ends
—
Market price per share
Earnings per share
Net income
Net sales
Net incomePreferred dividendsWeighted-average common shares outstanding
Gross profitNet sales
Net income
Average total assets
Net sales
Average total assets
Cash dividends declared on common stock
Net income
Net incomePreferred dividends
Average common stockholders’ equity
–