Chp. 17 + 16 lol
The relationship between total liabilities and total assets is the ________.
debt ratio
A high times−interest−earned ratio indicates difficulty in paying interest expense.
false
If inventory turnover is too slow, a company may be unable to sell goods or it may be understating merchandise inventory.
false
A company reports total assets of $930,000 and stockholders' equity of $540,000. Calculate the debt ratio. (Round your answer to two decimal places.)
14.94%
Which of the following statements is true for financial leverage?
The higher the debt to equity ratio, the higher the financial leverage. DEBIT TO EQUITY RATIO = total liabilities / total equity
Merchandise inventory and prepaid expenses are excluded from the acid−test ratio.
true
The formula for calculating the cash ratio is ________.
(Cash + Cash equivalents) / Total current liabilities
The financial statements for Stephens' Electric Company include the following items: 2025 2024 Cash $56,000 $54,000 Cash Equivalents 24,500 15,000 Net Accounts Receivable 27,000 36,000 Merchandise Inventory 83,000 66,000 Total Assets 525,000 548,000 Accounts Payable 37,500 32,000 Salaries Payable 25,000 18,000 Long−term Note Payable 63,000 59,000 Income From Operations 132,500 119,000 Interest Expense 34,000 32,000 Compute the 2024 cash ratio. (Round your answer to two decimal places.)
1.38
The financial statements for Uptown Service Company include the following items: 2025 2024 Cash $45,500 $41,000 Short−term Investments 28,000 20,000 Net Accounts Receivable 56,000 55,000 Merchandise Inventory 161,000 49,000 Total Assets 531,000 554,000 Accounts Payable 134,500 126,000 Salaries Payable 17,000 12,000 Long−term Note Payable 56,000 60,000 Compute working capital for 2025.
139,000
Elephant, Inc.'s cost of goods sold for the year is $2,200,000, and the average merchandise inventory for the year is $129,000. Calculate the inventory turnover ratio of the company. (Round your answer to two decimal places.)
17.05 times
Ketchen, Inc. provides the following information for 2024: Net income $250,000 Market price per share of common stock $65 per share Dividends paid $180,000 Common stock outstanding at Jan. 1, 2024 150,000 shares Common stock outstanding at Dec. 31, 2024 220,000 shares The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock. (Round any intermediate calculations and your final answer to two decimal places.)
48.15%
Which of the following describes working capital?
Current assets minus current liabilities
Requirement 5. Evaluate the dividends. Begin by selecting the appropriate measurements to evaluate dividends.
Dividend payout Dividends per share The dividend per share is increasing over time so the stock is attractive.
Issuance of common stock
F+
Issuance of common stock.
F+
Issuance of long-term note payable to borrow cash.
F+
Payment of cash dividend.
F-
Payment of dividends
F-
Payment of long-term debt.
F-
Purchase of treasury stock.
F-
The balance sheet shows why cash increased or decreased.
False
Working capital measures a business's ability to meet its long−term obligations with its current assets.
False
Requirement 3. Evaluate the ability to sell merchandise inventory. Begin by selecting the appropriate measurements that should be used to measure the ability to sell inventory and the profitablilty of each sales dollar above the cost of goods sold.
Gross profit percentage Days' sales in inventory Inventory turnover Inventory turnover has increased over the period examined, which is a positive sign. The company is selling inventory more rapidly.
Cash sale of land (no gain or loss).
I+
Acquisition of building by issuance of common stock.
NIF
Acquisition of equipment by issuance of note payable.
NIF
54) Perez Biofuels Company is preparing its statement of cash flows using the indirect method. Refer to the following information.1) Repayments on Long-Term Notes Payable $58,0002) New borrowing on Long-Term Notes Payable $19,000 Which of the following statements is accurate regarding the statement of cash flows?
Net cash used for financing activities will amount to $(39,000). 58,000 - 19,000 = -39,000
Decrease in Merchandise Inventory.
O+
Decrease in accounts receivable
O+
Depreciation Expense.
O+
Depreciation expense
O+
Increase in Accounts Payable.
O+
Requirement 1. What is the purpose of the statement of cash flows?
The purpose of the statement of cash flows is to show where cash came from and how cash was spent during the period.
No single ratio tells the whole picture of any company's performance.
True
Online financial databases provide data on companies which allows investors to compare the companies' future earnings.
false
The asset turnover ratio is a way to evaluate how well a company can pay its short−term liabilities.
false
The cash flows from investing activities is completed by reviewing the long−term liabilities section of the balance sheet.
false
The financing activities section of the statement of cash flows is often considered the most important section because it details the day-to-day cash receipts and payments of a company.
false
The gross profit percentage is an indicator of how well a company is positioned to pay off its short−term liabilities
false
In preparing a statement of cash flows using the indirect method, the Depreciation Expense ________.
is added back as an adjustment to Net Income in the operating activities section
The current ratio is calculated as total current assets divided by total current liabilities.
true
The dividend yield can be calculated for both common and preferred stockholders.
true
The times−interest−earned ratio measures the number of times earnings before interest and taxes can cover interest expense.
true
The acid−test ratio measures a company's ability to pay all its current liabilities if they came due immediately.
true
Washington Company is preparing its statement of cash flows using the indirect method. Refer to the following portion of the comparative balance sheet: Washington Company Comparative Balance Sheet December 31, 2025 and 2024 2025 2024 Increase/(Decrease) Accounts Payable $9,000 $5,000 $4,000 Accrued Liabilities 4,000 1,300 2,700 Long−term Notes Payable 58,000 67,000 (9,000) Total Liabilities $71,000 $73,300 $(2,300) Additional information provided by the company includes the following: 1. During 2025, the company repaid $37,000 of long−term notes payable. 2. During 2025, the company borrowed $28,000 on a new long−term note payable. Based on the above information only, what amount of net cash flow would be shown in the financing section of the statement of cash flows?
$(9,000) because Long−term Notes Payable goes with financial ----------------------------------- 1. During 2025, the company repaid $37,000 of long−term notes payable. 2. During 2025, the company borrowed $28,000 on a new long−term note payable. 37,000 - 28,000 = 9,000 ALSO the question tells us (9,000) where it says Long-term Notes payable.
Requirement 1. Compute earnings per share (EPS) for 2024 for Excel's. Round to the nearest cent. Begin by selecting the formula to calculate Excel's Companies' EPS. Then enter the amounts and calculate the EPS for 2024 Requirement 2. Compute Excel's Companies' price/earnings ratio for 2024. The market price per share of Excel's stock is $17.50. Begin by selecting the formula to calculate Excel's Companies' price/earnings ratio. Then enter the amounts and calculate the EPS for 2024. Requirement 3. What do these results mean when evaluating Excel's Companies' profitability?
(Net income - Preferred dividends) ÷ Weighted avg number of CSO COMMON SHARES OUTSTANDING = EPS EARNINGS PER SHARE ($14,100 - $0) ÷ $15,000 = $0.94 Market price per share of CS ÷ Earnings per share = Price/earnings ratio $17.50 ÷ $0.94 = 18.62 's Companies' price/earnings ratio for 2024 means that thecompany's stock is selling at 18.62 TIMES ONE YEAR'S EARNINGS PER SHARE. This is HIGH. This indicates that investors are paying a HIGHER PRICE for the stock compared to itsearnings, EVEN MORE SO than the industry average. EXPLAINED: Net income - preferred dividends / weighted average number of common shares outstanding
Which of the following would be considered cash inflows from financing activities?
- Cash received from the issuance of common stock - Cash received from issuing long-term bonds
Louisiana Company uses the indirect method to prepare its statement of cash flows. Refer to the following portion of the comparative balance sheet: Louisiana Company Comparative Balance Sheet December 31, 2025 and 2024 2025 2024 Increase/(Decrease) Common Stock $34,000 $2,300 $31,700 Retained Earnings 123,000 77,000 46,000 Treasury Stock (12,000) (8,300) (3,700) Total Equity $145,000 $71,000 $74,000 Note: 1. There were no stock retirements during the year. 2. There were no sales of treasury stock during the year. Compute the cash flow from transactions involving treasury stock
3,700 negative cash flow because Treasury Stock is in () meaning -
Oklahoma Corp. uses the indirect method to prepare its statement of cash flows. Refer to the following information for 2024 1. Long−Term Notes Payable, beginning balance, $84,000 2. Long−Term Notes Payable, ending balance, $75,000 3. Common Stock, beginning balance, $3,400 4. Common Stock, ending balance, $29,000 5. Retained Earnings, beginning balance, $75,000 6. Retained Earnings, ending balance, $120,000 7. Treasury Stock, beginning balance, $5,600 8. Treasury Stock, ending balance, $10,300 9. No stock was retired. 10. No treasury stock was sold. 11. During 2024, the company repaid $38,000 of long−term notes payable. 12. During 2024, the company borrowed $29,000 on new long−term notes payable. 13. Net income for the year was $49,000. 14. Assume all dividends declared during the year were paid. 15. Common Stock was issued for cash. What is the net cash provided by financing activities?
7,900
The purposes of the statement of cash flows are to
A. determine ability to pay debts and dividends. B. evaluate management decisions. C. predict future cash flows.
Danby, Inc. provides the following data from its income statement for 2024: Net Sales $560,000 Cost of Goods Sold (170,000) Gross Profit $390,000 Calculate the gross profit percentage. (Round your answer to two decimal places.)
Gross profit percentage = gross profit / net sales revenue GROSS PROFIT 390,000 / NET SALES 560,000 = .6964285714 = 69.64%
Increase in Salaries Payable.
O+
Increase in accounts payable
O+
Loss on sale of land
O+
Net income.
O+
Requirement 1. Compute the trend analysis for net sales and net income (use 2020 as the base year).
Trends in net sales and net income are both upward, which is positive.
The cash paid for the purchase of equipment will typically be shown in the investing activities section of the statement of cash flows.
True
California Corp. uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: California Corp. Comparative Balance Sheet December 31, 2024 and 2023 2024 2023 Increase /(Decrease) Accounts Payable $8,000 $9,000 $(1,000) Accrued Liabilities 3,000 1,500 1,500 Long−term Notes Payable 56,000 60,000 (4,000) Total Liabilities $67,000 $70,500 $(3,500) The change in Accrued Liabilities is shown as a negative cash flow in the adjustments to net income.
false
The third section presented on the statement of cash flows is the non−cash operating activities section.
false
When computing investing cash flows, it is helpful to evaluate the T−accounts for each long−term liability.
false
While preparing a statement of cash flows using the indirect method, an increase in current assets is added to net income to arrive at net cash provided by operating activities.
false
For the year ended December 31, 2025, the Statement of Cash Flows for Mississippi Family Auto Supply shows the following information: Net Cash Used by Operating Activities, $(70,000); Net Cash Provided by Investing Activities, $49,000; and Net Cash Provided by Financing Activities, $41,000. Cash has increased by $160,000.
false ----- 49,000 + 41,000 = 90,000 90,000 - 70,000 = 20,000
Days' sales in inventory measures how quickly a company can collect its receivables.
false Days sales of inventory (DSI) is the average number of days it takes for a firm to sell off inventory.
Normally, companies with low gross profit percentages will have low asset turnover.
false Just because a company has a low gross profit percentage does not mean that they have a low asset turnover.
Unexpected or inconsistent movements among sales, merchandise inventory, and receivables reflect normal market conditions and do not pose red flags in financial statements.
false Unexpected or inconsistent movements among sales, merchandise inventory, and receivables reflect normal market conditions and DO POSE RED FLAGS in financial statements.
The three major categories included on the statement of cash flows are ________.
investing, operating, and financing activities
Walton, Inc. provides the following data: 2025 2024 Cash $48,000 $25,000 Accounts Receivable, Net 100,000 62,000 Merchandise Inventory 75,000 50,000 Property, Plant, and Equipment, Net 181,000 120,000 Total Assets $404,000 $257,000 Additional information for the year ending December 31, 2025: Net Credit Sales $520,000 Cost of Goods Sold 150,000 Interest Expense 23,000 Net Income 180,000 Calculate the rate of return on total assets for 2025. (Round your answer to two decimal places.)
61.42%
Requirement 4. Evaluate the ability to pay debts. Begin by selecting the appropriate measurements that should be used to measure the ability to pay debts.
Acid-test ratio Current ratio Debt ratio Debt to equity ratio Times-interest-earned ratio The current and acid-test ratios are fairly high. This indicates that the company can pay its liabilities. The company's debt to total assets (its debt ratio) is not extraordinarily high, which will facilitate the company making all payments for debt. The times-interest-earned ratio has increased from 2020 to 2024 which is favorable.
Requirements 1. How much are cash dividends? 2. What was the amount of the cash receipt from the sale of plant assets? a. Beginning and ending Retained Earnings are $41,000 and $67,000, respectively. Net income for the period is $62,000. b. Beginning and ending Plant Assets are $121,500 and $129,500, respectively. c. Beginning and ending Accumulated Depreciation—Plant Assets are $21,500 and $26,500, respectively. d. Depreciation Expense for the period is $15,000, and acquisitions of new plant assets total $29,000. Plant assets were sold at a $3,000 gain.
Cash dividends are $36,000 beginning balance of retained earnings + net income - ending balanceof retained earnings = dividens -------------- The cash receipt from the sale plant assets is $14,000 beginning balance plant assets + acquisition - ending balance plant assets = cost of assets sold beginning balance of accumulated depreciation + depreciation expense - ending balance accumulated depreciation = accumulated depreciation fo assets sold cost of assets sold - accumlated depreciation of assets sold = book value of assets sold book value of assets sold + gain = cash receipt from sale of plant assets
The financial statements of Denison Furniture Company include the following items: 2025 2024 Cash $60,500 $57,000 Short−term Investments 34,000 10,000 Net Accounts Receivable 99,000 103,000 Merchandise Inventory 161,000 147,000 Total Assets 535,000 553,000 Total Current Liabilities 225,000 212,000 Long−term Note Payable 54,000 59,000 What is the 2025 cash ratio? (Round your answer to two decimal places)
Cash ratio = Cash + Cash equivalents / total current liabilities. Don't put cash equivalents as cash equivalents NO CLUE DUDE LOL
Which item does not appear on a statement of cash flows prepared by the indirect method?
Collections from customers
Use the following ratio data to complete Heirloom Mills' income statement: 1. Inventory turnover was 4.90 (beginning Merchandise Inventory was $890; ending Merchandise Inventory was $850). 2. Profit margin ratio is 15%.
Cost of goods sold = inventory turnover x average merch inventory Net income = profit margin ration x net sales rev interest expense = net sales - COGS - selling and administive expenses - other expenses - income b4 taxes income tax expense = income b4 imcome tax - net income
The financial statements of Jim's Natural Foods include the following items: a. Compute the current ratio for the current year. b. Compute the cash ratio for the current year. c. Compute the acid-test ratio for the current year. d. Compute the inventory turnover for the current year. e. Compute the days' sales in inventory for the current year. f. Compute the days' sales in receivables for the current year. g. Compute the gross profit percentage for the current year.
Current ratio = Total current assets / Total current liabilities Cash ratio = (Cash + Cash equivalents) / Total current liabilities Acid-test ratio= (Cash + STI + Net current receivables) / Total current liabilities Inventory turnover = Cost of goods sold / Average merchandise inventory Days' sales in inventory = 365 days / Inventory turnover Days' sales in receivables = 365 days / Accounts receivable turnover ratio Gross profit percentage = Gross profit / Net sales revenue (gross profit = net sales - cost of goods sold) photo
Candle Shop, Inc. has net sales on account of $1,600,000. The average net accounts receivable are $640,000. Calculate the days' sales in receivables.(Use 365 days for any calculations. Round any intermediate calculations and your final answer to two decimal places.)
Days' Sales in Inventory = 365 / inventory turnover 365 / 1,600,000 (net sales on account) = 2.275 E -4 2.275 E -4 * 640,000 (average net accounts receivable) = 145.6 146 DAYS!
Requirement 2. For the profitability analysis, compute Ambrose's (a) gross profit percentage and (b) profit margin ratio. Compare these figures with the industry averages. Is Ambrose's profit performance better or worse than the industry average? (a) Compute Ambrose's gross profit percentage (b) Compute Ambrose's profit margin ratio. Compare these figures with the industry averages. Is Ambrose's profit performance better or worse than the industry average? Requirement 3. For the analysis of financial position, compute Ambrose's (a) current ratio and (b) debt to equity ratio. Compare these ratios with the industry averages. Assume the current ratio industry average is 1.47, and the debt to equity industry average is 1.83. Is Ambrose's financial position better or worse than the industry averages? (a) Compute Ambrose's current ratio. (b) Compute Ambrose's debt to equity ratio. Compare these ratios with the industry averages. Assume the current ratio industry average is 1.47 and the debt to equity industry average is 1.83. Is Ambrose's financial position better or worse than the industry averages?
Gross profit percentage = Gross profit ÷ Net sales =32.4% Profit margin ratio = Net income ÷ Net sales = 10.6% When comparing the gross profit percentage and the profit margin ratio with the industry averages, Ambrose's profit performance is worse than the industry averages for both the gross profit percentage and the profit margin ratio. Current ratio = Total current assets ÷ Total current liabilities = 1.46 Debt to equity ratio = Total liabilities ÷ Total equity = 2.16 current ratio is close to the industry average. The debt to equity ratio is significantly worse than the industry average.
Purchase of equipment
I-
Which of the following lists the four major financial statements of a company?
Income Statement, Statement of Retained Earnings, Balance Sheet, Statement of Cash Flows
Which of the following is true of the statement of cash flows?
It covers a span of time and is dated the same as the income statement.
Which of the following describes the operating activities section of the statement of cash flows?
It reports on activities that create revenues or expenses for the entity's business.
The net income of a company for the year was $520,000. The company has no preferred stock. Common stockholders' equity was $1,600,000 at the beginning of the year and $2,400,000 at the end of the year. Calculate the rate of return on common stockholders' equity. (Round your answer to two decimal places.)
Net income - preferred dividends / average common stockholders equity $1,600,000 + $2,400,000 = 4000000 4000000 / 2 = 2000000 AVERAGE COMMON STOCKERHOLDERS EQUITY 520,000 / 2000000 = .26 26% measure of profitability
Amber, Inc. provides the following information for 2025: Net income $320,000 Market price per share of common stock $60 per share Dividends paid $185,000 Common stock outstanding at Jan. 1, 2025 160,000 shares Common stock outstanding at Dec. 31, 2025 220,000 shares The company has no preferred stock outstanding. Calculate the earnings per share for 2025. (Round your answer to two decimal places.)
Net income - preferred dividends / weighted average number of common shares outstanding Net income $320,000 + (160,000+220,000/ 2) = 1.68 $1.68 per share
Loss on sale of land.
O+
Decrease in Accrued Liabilities.
O-
Decrease in accrued liabilities
O-
Gain on sale of building
O-
Increase in Prepaid Expenses.
O-
Increase in merchandise inventory
O-
Data for McNight State Bank follow: Evaluate the common stock of McNight State Bank as an investment. Specifically, use the three stock ratios to determine whether the common stock has increased or decreased in attractiveness during the past year. Round to two decimal places. Begin by selecting the formula to calculate the price/earnings ratio. Now, calculate the price/earnings ratio for 2024 and 2023. Select the formula to calculate the dividend yield. Now, calculate the dividend yield on common stock for 2024 and 2023. Select the formula to calculate the dividend payout. Now, calculate the dividend payout for 2024 and 2023 Determine whether the common stock has increased or decreased in attractiveness during the past year.
Price/earnings ratio = Market price per share of common stock ÷ Earnings per share. Price/earnings ratio 2024 $35.45 2023 $28.89 EXPLAINED: (Net income - preferred dividends) / weighted average number of common shares outstanding THIS NUMBER COMES FROM THE Total Stockholders' Equity at Year-End (includes 75,000 shares of common stock) = earnings per share THEN do market price per share of common stock divided by the earnings per share ---------------------- Dividend yield = Annual dividend per share ÷ Market price per share Dividend yield on common stock % 2024 1.9% 2023 2.8% EXPLAINED: Annual dividend per share ÷ Market price per share × 100 = Dividend yield ANNUAL DIVIDENED PER SHARE = COMMON DIVIDENS / COMMON SHARES OUTSTANDING NOW TAKE THAT ## AND / BY MARKET PRICE PER SHARE X 100 ---------------------- Dividend payout = Annual dividend per share ÷ Earnings per share Dividend payout % 2024 67% 2023 82% EXPLAINED: STEP 1: (net income - perferred dividens) / weighted average number of common shares outstanding = EARNINGS PER SHARE STEP 2: Dividen Common / 90,0000 shares of common stock = ANNUAL DIVIDEN PER SHARE STEP 3: ANNUAL DIVIDEN PER SHARE / EARNINGS PER SHARE = DIVIDEN PAYOUT ---------------------- The stock's attractiveness INCREASED during 2024, as shown by the INCREASED in the price/earnings ratio. If an investor is looking at the stock for dividend potential, then the stock is LESS attractive than last year; both the dividend yield and the dividend payout DECREASED
Requirement 2. Compute the profitability analysis. Begin by selecting the appropriate measurements that should be used to complete a profitability analysis.
Profit margin ratio Rate of return on total assets Rate of return on common stockholders' equity Earnings per share of common stock The profit margin ratio, return on assets, and return on equity are increasing over the five years examined. The return on assets and the return on equity for each year are both very respectful. The earnings per share is increasing over time so the stock is attractive.
Identify the category of the statement of cash flows in which each transaction would be reported.
Purchased equipment for $130,000 cash. -> INVESTING Issued $14 par preferred stock for cash. -> FINANCING Cash received from sales to customers of $35,000. -> OPERATING Cash paid to vendors, $17,000. -> OPERATING Sold building for $19,000 gain for cash. -> INVESTING AND OPERATING Purchased treasury stock for $28,000. -> FINANCING Retired a notes payable with 1,250 shares of the company's common stock. -> NON-CASH INVESTING AND FINANCING
Requirement 1. Compute the acquisition of plant assets for White Media Corporation during 2024. The business sold no plant assets during the year. Assume the company paid cash for the acquisition of plant assets. Requirement 2. Compute the payment of a long-term note payable. During the year, the business issued a $5,400 note payable.
The acquisition of equipment is $23,000 Plant asset in 2024 - plant asset in 2023 ending balance plant assets + book value of plant assets sold - beginning balance plant assets = acquisition of plant assets ----- The payment of a long-term note payable is $6,400 notes payable in 2024 - notes payable in 2023 = -1,000 now subtract notes payable of 5,400 = -6,400
Illinois Woodworking Company is preparing its statement of cash flows using the indirect method. During the year, Illinois Woodworking sold equipment for $6,490 cash. The net book value of the asset was $4,550. Which of the following statements is true?
The cash receipt of $6,490 is shown as a positive cash flow in the investing activities section.
Requirement 1. Compute the inventory turnover, days' sales in inventory, and gross profit percentage for Achieve's Companies for 2024. Compute the inventory turnover. Compute the days' sales in inventory. Compute the gross profit percentage. ------------ Requirement 2. Compute days' sales in receivables during 2024. Round intermediate calculations to three decimal places. Assume all sales were on account. ------------ Requirement 3. What do these ratios say about Achieve's Companies' ability to sell inventory and collect receivables?
The inventory turnover = Cost of goods sold ÷ Average merchandise inventory 3.44 times. The days' sales in inventory = 365 days ÷ Inventory turnover 106 days. The gross profit percentage = Gross profit ÷ Net sales revenue 51.6% EXPLAINED: GROSS PRRFIT = net sales - cost of goods sold ------- Days' sales in average receivables = 365 days ÷ Accounts receivable turnover ratio 50 days EXPLAINED: Accounts receivable turnover ratio = net credit sales / average net accounts recievables NET CREDIT SALES IS GIVEN ON INCOME STATEMENT AVERAGE NET ACCOUNTS REIVEBLE = ACCOUNTS RECEIVABLE FROM BALANCE SHEET ADD THEM THEN DIVIDE BY 2. 365 / Accounts receivable turnover ratio Achieve's Companies' have a high amount of inventory on hand and a LOW inventory turnover ratio. This could be an area to look at and compare to the prior year and industry average. They have a HIGH gross profitpercentage, which is a GOOD INDICTATOR The amount of time it takes to collect receivables seems HIGH, but this would depend on the CREDIT TERMS
Financial statements all have a goal. The statement of cash flows does as well. Describe how the statement of cash flows helps investors and creditors perform each of the following functions: a. Predict future cash flows. b.Evaluate management decisions. c. Predict the ability to make debt payments to lenders and pay dividends to stockholders.
The statement of cash flows helps predict future cash flows by reporting PAST cash RECEIPTS and PAYMENTS, which are good predictors of future cash flows. The statement of cash flows helps evaluate management decisions by reporting on managers' INVESTMENTS. The statement of cash flows helps predict the ability to make debt payments to lenders and pay dividends to stockholders by reporting WHERE CASH CAME FROM AND HOW CASH WAS SPENT.
Companies, a home improvement storechain, reported the following summarizedfigures: Win's has 20,000 common shares outstanding during 2024. Requirement 1. Compute Win's Companies' current ratio at May 31, 2024 and 2023. Begin by selecting the formula to calculate Win's Companies' current ratio. Then enter the amounts and calculate the current ratio for 2024 and then 2023. Requirement 2. Did Win's Companies' current ratio improve, deteriorate, or hold steady during 2024?
Total current assets ÷ Total current liabilities = Current ratio ASSETS / LIBAILITIES 2024 $51,700 ÷ $22,000 = 2.35 2023 $28,900 ÷ $13,000 = 2.22 TOTAL CURRENT ASSETS = CASH + SHORT-TERM INVESTMENTS + ACCOUNTS RECIEVABLE + MERCH INV. + OTHER CURRENT ASSETS Win's Companies' current ratio improved.
The direct method restates the income statement in terms of cash.
True
The financing activities section of the statement of cash flows includes paying dividends and making payments on long−term liabilities.
True
Requirement 6. Should you invest in the common stock of WRS Athletic Supply, Inc.? Fully explain your final decision.
WRS's trend of netsales, netincome, inventoryturnover, earnings pershare, andtimes-interest-earned have improved. All other measures have held steady or improved. There are no apparent trouble spots in WRS's data.Therefore, invest in WRS for increasing dividends and steady growth.
The financial statements of Carrier Office Furniture Company include the following items: 2025 2024 Cash $42,500 $44,000 Short−term Investments 33,000 12,000 Net Accounts Receivable 99,000 97,000 Merchandise Inventory 158,000 148,000 Total Assets 531,000 546,000 Total Current Liabilities 269,000 286,000 Long−term Note Payable 54,000 57,000 What is working capital for 2025?
Working Capital: Current assets − Current liabilities Current assets = (cash + Short-term investments + Net accounting receivable + merch inv). Cash $42,500 Short−term Investments 33,000 Net Accounts Receivable 99,000 Merchandise Inventory 158,000 = 332500 CURRENT ASSETS Total Current Liabilities 269,000 332500 - 269,000 = 63500
Data for WebEnterprises follows: Compute the dollar amount of change and the percentage of change in Web Enterprises' working capital each year during 2025 and 2024. What do the calculated changes indicate? Begin by selecting the formula to compute the working capital, the dollar amount of change and the percentage of change in Web Enterprises' working capital. First, calculate the amount and percentage of change in working capital in 2024. Next, calculate the amount and percentage of change in working capital in 2025. What do the calculated changes indicate?
Working capital = Current assets - Current liabilities Dollar amount of change = Later period amount - Earlier period amount Percentage of change = (Dollar amount of change ÷ Base period amount) × 100 ----- The amount of change in working capital is $40,000. The percentage of change in working capital is 32.0%. The amount of change in working capital is $65,000. The percentage of change in working capital is 39.4. FORE THESE FIND THE WORKING CAPITAL TOTALS AND WRITE THEM DOWN THEN SUBTRACT THEM FROM EACH OTHER :) --- Web's Enterprises' working capital has improved year over year from 2023 to 2025.
Analysts look for red flags in financial statements that may signal financial trouble. Which of the following is a red flag that suggests that a company may be in trouble?
a significant decrease in net income for several years in a row
Virginia Company uses the indirect method to prepare the statement of cash flows. Refer to the following section of the comparative balance sheet: Virginia Company Comparative Balance Sheet December 31, 2024 and 2023 2024 2023 Increase /(Decrease) Accounts Payable $4,000 $6,000 $(2,000) Accrued Liabilities 2,000 1,000 1,000 Long−term Notes Payable 84,000 90,000 (6,000) Total Liabilities $90,000 $97,000 $(7,000) How will the change in Accounts Payable be shown on the statement of cash flows?
as a deduction from Net Income in the operating activities section
The statement of cash flows helps users ________.
evaluate management decisions
The ________ section of the statement of cash flows includes increases and decreases in long−term assets.
investing activities
The price/earnings ratio shows the ________.
market price of $1 of earnings EQUATION IS = market price per share of common stock / earnings per share
Canada Company needs to purchase a property to build their headquarters. An investor is willing to exchange land with a market value of $700,000 for shares of common stock. On the statement of cash flows, this transaction would be shown as part of ________.
non−cash investing and financing activities
Allen Services purchased 20 delivery vehicles by issuing a 20−year installment note payable for $720,000. On the statement of cash flows, this transaction would be shown in the ________.
non−cash investing and financing activities section
Which of the following sections of the statement of cash flows is presented differently between the direct method and indirect method?
operating activities
The following data are adapted from the financial statements of Beth's Shops, Inc.: Prepare Beth's condensed balance sheet as of December 31, 2024
photo
Which of the following is a cash outflow for a financing activity on the statement of cash flows?
purchase of treasury stock
Which of the following sections of the statement of cash flows includes activities that increase and decrease long−term liabilities and stockholders' equity?
the financing activities section
Which of the following sections of the statement of cash flows include activities that affect current assets and current liabilities on the balance sheet? (Assume the indirect method is used.)
the operating activities section
Financing activities on the statement of cash flows affect the long−term liability and equity accounts.
true
The non−cash investing and financing activities section of the statement of cash flows appears as a separate schedule of the statement of cash flows or in the notes to the financial statements.
true
Connecticut, Inc. Comparative Balance Sheet December 31, 2025 and 2024 2025 2024 Increase/(Decrease) Cash $28,000 $19,000 $9,000 Accounts Receivable 35,000 39,000 (4,000) Merchandise Inventory 56,000 26,000 30,000 Plant and Equipment 126,000 90,000 36,000 Accumulated Depreciation−Plant and Equipment (46,000) (41,000) (5,000) Total Assets $199,000 $133,000 $66,000 Additional information provided by the company includes the following: 1. Equipment was purchased for $70,000 with cash. 2. Equipment with a cost of $34,000 and accumulated depreciation of $7,500 was sold for $46,000. What was the amount of net cash provided by (used for) investing activities?
$(24,000) 1. Equipment was purchased for $70,000 with cash. 2. Equipment with a cost of $34,000 and accumulated depreciation of $7,500 was sold for $46,000. 46,000 - 70,000 = -24,000 since the 70,000 was purchased with cash and only sold for 46,000, so the 24,000 has got to come from investing to make up for the loss difference.
