1.There are different tools for analyzing the financial statements of a company, such as horizontal analysis, vertical analysis, ratios for measuring financial health and profitability, and so forth. But before we begin using these tools, it is important to know the purpose of each tool.

Why do we need different tools for analyzing financial statements? Don't the numbers in the financial statements speak for themselves?

2. Compute return on common stockholders equity for 2018 rounded to two decimal places based on the following data:

2018 2017

Cash $200,000 $245,000

Net Income 110,000 160,000

Common Stock 175,000 150,000

Paid-in Capital in Excess of Par 200,000 180,000

Treasury Stock 40,000 35,000

Retained Earnings 450,000 385,000

3. Compute the accounts receivable turnover ratio based on the following data.

Net credit sales 700,000

Beginning balance in accounts receivable 30,000

Ending balance in accounts receivable 40,000

4. What is the typical base used in vertical analysis of a balance sheet?