4-0 Introduction to Analysis of Financial Statements Part 1 What two main components make up a firm's capital structure? 4-0 Introduction to Analysis of Financial Statements Part 2 Calculate book value per share given the following information. Total Assets: Total Liabilities: Shares outstanding: $4,000 $1,000 250 4-1 Ratio Analysis Why is using ratio analysis important? 4-2 Liquidity Ratios A firm's assets and liabilities are listed below: Land purchased five years ago for $1,000 Inventory properly recorded at lower of cost or market for $2,000 Accounts payable of $3,000 What is the firm's current ratio? 4-3 Asset Management Ratios If a firm's inventory turnover ratio is low, what might that mean about the firm's level of sales, its average level of inventory, or both? 4-3b Days Sales Outstanding Calculate the days sales outstanding given the following information Day Sales (on credit) A/R $5,000 $4000 $2,000 $3,000 3* On day 3, $1,000 of the sales made on day 1 are collected in cash. A/R at end of day 3 before collection: 14,000 A/R at end of day 3 after collection: 13,000 4-4 Debt Management Ratios A firm's times-interest-earned was 4.20. Its earnings before interest and taxes was S9,000. What was its interest expense? 4-7 The DuPont Equation A company's profit margin (on sales) is 7%, its total assets turnover is 1.1, and its assets to equity is 1.5. Furthermore, the company's debt-to-equity is 0.5. What is the company's return on equity? 8Efect of Reducing Receivables What is the reduction in outstanding accounts receivable given the following information? As the A/R decreases, what account increases as a result? Annual sales of $5,000,000 with a DSO of 18. A new collection incentive has reduced DSO from 18 to 12