Unit 3.1 Financial Statement Analysis and Ratios

If a company has total sales of $46,000 in 2023 and total sales of $9,000 in 2022, how would an analyst calculate the horizontal analysis in dollars?

$46,000 − $9,000

If a company has total sales of $15,000 and the cost of sales is $3,000, how would an analyst calculate the vertical analysis of cost of sales as a percentage of total sales?

($3,000/$15,000) x 100 The formula used to calculate the vertical analysis of the cost of sales as a percentage of the total sales is to divide the cost of sales $3,000 by the total sales $15,000 times 100.

If a company has total inventory of $83,000 in 2023 and total inventory of $80,000 in 2022, how would an analyst calculate the horizontal analysis as a percentage?

($83,000 − $80,000)/$80,000 x 100 The formula used to calculate the horizontal analysis of inventory as a percentage is the current year's inventory value minus the prior year's inventory value, divided by the prior year's inventory value, times 100—specifically, $83,000 − $80,000/$80,000 times 100.

Calculate the total asset turnover if a company has net sales of $75,000, cost of goods sold of $30,000, and average total assets of $150,000

.5 Total asset turnover = Net sales divided by Average total assets

Calculate the equity ratio if a company has the following balance sheet information: $128,000 in total assets, $28,000 in total liabilities, and $100,000 in stockholder's equity.

.78 Equity ratio= Stockholders equity divided by total assets

Calculate the quick ratio if a company has $72,000 in quick assets composed of cash and accounts receivables and $59,000 in current liabilities.

1.22 quick ratio (acid test ratio) = Quick assets divided by current liabilities.

A company has the following information: the net operating income is $50,000, sales are $275,000, net sales are $200,000, and gross margin is $30,000. Calculate the gross margin ratio and the operating margin.

10.9% Gross margin ratio= (Gross margin/sales) x 100 25% Operating margin= (net operating income divided by net sales) x 100

Calculate working capital if a company has $852,000 in current assets, $916,000 in total assets, $705,000 in current liabilities, and $878,000 in total liabilities.

147,000 Working capital = Current assets - Current liabilities

Calculate the current ratio if a company has $29,000 in current assets, $40,000 in total assets, $12,000 in current liabilities, and $19,000 in total liabilities.

2.42 Current ratio = Current assets divided by current liabilities

Calculate the debt-to-equity ratio if a company has the following balance sheet information: $135,000 in current liabilities, $389,000 in total liabilities and $153,000 in stockholder's equity.

2.54 Debt-to-equity = total liabilities divided by stockholder's equity.

A company has the following information: the net income is $230,000, net sales are $1,430,500, and average shareholders' equity is $1,150,000.Calculate the return on equity and the net profit margin.

20% Return on equity = (Net income divided by average stockholders' equity) x 100 16% (Net income divided by net sales) x 100

Calculate the inventory turnover ratio if a company has a cost of goods sold of $78,000, sales of $110,000 and an average inventory balance of $18,000.

4.33 Inventory turnover = Cost of goods sold divided by average inventory balance

A company has the following information: the net operating income is $100,000, net sales are $2,200,000, and operating assets are $2,000,000. Calculate the return on operating assets and the turnover of operating assets.

5% Return on Operating assets= (Net operating income divided by operating assets) x 100 1.1 Turnover of operating assets = Net sales divided by Operating assets

Calculate the times earned interest ratio if a company has the following information: $47,000 earnings before interest and taxes (EBIT) and an interest expense of $8,000.

5.88 Times interest earned ratio= EBIT divided by Interest expense.