ad the ice 1425 www. for the n a on credit) Died Everyone 42. of Goods Sold 10.000 sheet and market price is at the of the year 524.00 $20.00 A Receivable, Net Merchandise inventory Prepaid Expenses Tural Current Assets $265.000 5323000 105,000 12.000 Current Liabilities Tal Liabilities Common Stock si par (12.000 shares) Si par (17.000 shares) foul Stockholders' Equity wurket Price per Share of Common Stock Duidends Paid per Common Share 17,000 195,000 114 48 161,000 76.50 1.10 mber 31, 2018, and 8 and 15,000.00 Decem and balance sheet data at the bag of the current year: Digitalized Every Zone $ 41.000 81,000 261,000 $ 54.000 87,000 272,000 chmon Balance Sheet Accounts Receivable, net Merchandise Inventory Total Assets Common Stock: $1 par (12,000 shares) 51 par (17,000 shares) 12,000 of common stock 17,000 948 chapter 17 price/carrings alyzed all other Your strategy is to invest in companies that have low price to be in good shape financially. Assume that you have analyse that your decision depends on the results of ratio analysis. for the current year: e. Earnings per share of Requirements 1. Compute the following ratios for both companies for the cu a. Acid-test ratio stock b. Inventory turnover c. Days' sales in receivables d. Debt ratio 2. Decide which company's stock better fits your investment strategy Requireme Analyze the to invest in 1. Tree 2. Pro 3. Evo 4. Ev 5. E 6. Si f. Price/earnings ratio g. Dividend payout > Probler P17-30B Nets Cort 2015 Learning Objectives 2,4 P17-29A Completing a comprehensive financial statement analysie In its annual report, ABC Athletic Supply, Inc. includes the following five- 18: Inventory turnover 8.04 financial summary: ABC ATHLETIC SUPPLY, INC. Five-Year Financial Summary (Partial; adapted) amounts in thousands except per share data) 2018 2017 2016 2015 2014 s Revenue $ 250,000 $216,000 $191,000 $ 161,000 $134,000 Revenue Increase 16% 19% 20% 17% Comparative Store Sales Increase 5% 6% 4% 7% 9% ome-Net 2,110 1,840 1,760 1,690 ods Sold 189,250 164,592 148,216 126,385 106,396 Net Sale Net Inc Ending 13% 1,330 nable to pay its dates Fyahating the ability to Det Smart Touch Learning from the pebt to equity ratio Too much deht. How dodo Bos? If the debt ratio is too high, the company may be unable . Inality to collect receivables. Are days' sales in receivable competitors? If so, a cash shortage may be looming . Buildup of merchandise inventories. Is inventory turno over too pany may be unable to sell goods, or it may be overstating met Do any of these red flags apply to Smart Touch Learning in the chapter? Although the financial statements depict a strong The analysis pointed out several areas of weakness for Smart Touch low inventory turner, low accounts receivable turnover, low o ng times interest earned, low asset turnover, and low earnings per share Profit ing should continue to carefully monitor its financial statements Exhibit 17.8 summarizes the financial ratios that you have learned in Evaluating profitability Swan Profit margin ratio Rate of return on to Exhibit 17-8 Using Ratios in Financial Statement Analysis Ratio Computation Information Provided Rate of return on common stockholders Evaluating the ability to pay current abilities Working capital Current astets - Current liabilities the t Earnings per share Abus 's ability to meet obligations with its curren The company's ability to pay sabilities from cash and cash Cash ratio Cash + Cash equivalents Evaluating stock as an invest et current receve Aciditest ratio con including chevalents Short term investments Total current liabilities The company's ability to me any's ability to pay to Price learnings ratio Current ratio Total current assets Total current liabilities Dividend yield The company's ability to pay liabilities from current was Dividend payout Co The following con 17-0 Using Ratios in Financial Statement Analysis i Ratio civables. Sales, me les lead to hichette er ty sales, merchandise Com n d for several years in a ww is reporting a neto cash flow from time any is in trouble. Are the may face a cash shortage eo that of major competi pay its debts eing the ability to pay long terme growing faster than for peberato Total pebitte equity ratio Total Total Tiinterest earned The so slow? If so, the com andise inventory om the analyses we did and growing company Learning that include ess profit margin, low Smart Touch Learn it continues to gros this chapter. to Frosting profitability: Profit margin ratio Rate of return on total Aase turnover ratio Net sales Average total Provided Rate of return on Common stockholders' equity Net Income - P Average common redvidends holders equity The relationship be t to common stockholders and the Common equity invested in the com Earnings per share Net income-Preferred Gividends Weighted average number of common shares outstanding at its short-term at assets. each share of its outstanding common tok Evaluating stock as an investment: ay current sh equivalents Pricelearnings ratio Market price per share of common stock Earnings per share The value the stock market places on sota company's earning ay all its current mmediately Dividend yield Annual dividend per share Market price per share The percentage of a market value is returned annually as dividends to stoche current Dividend payout Annual dividend per share Earnings per share Ratio of dividends declared per common sh relative to the earnings per share of the to and mode)