Chapter 19
Day 2:
Page 924 – BE19-2
Using the following data from the comparative balance sheet of Yanthe Company, prepare a horizontal
analysis:
Accounts receivable
Inventory
Total assets
December 31, 2003 December 31, 2002
$520,000
$400,000
840,000
600,000
3,500,000
2,800,000
Page 925 – BE19-5
Using the same data presented from BE19-2 for Yanthe Company, prepare a vertical analysis
Day 3:
Page 925 – BE19-7
The Artic Group Inc., based in Manitoba, operates in the packaged ice industry. From a recent balance
sheet, selected condensed financial data are shown below:
The Artic Group Inc.
Balance Sheet (partial)
December 31, 2000
(in thousands)
Current assets
Cash and cash equivalents
Accounts receivable
Inventories
Prepaid expenses
$2,214
8,377
3,126
1,569
Total current assets
Total current liabilities
15,286
16,626
What are the a) working capital, b) the current ratio, and c) the acid test ratio?
Page 925 – BE19-8
The following data are taken from the quarterly report of Maple Leaf Foods Inc.:
Accounts receivable
Sales (assume on account)
Maple Leaf Foods Inc.
September 30
(in thousands)
2000
1999
$241,527
$209,890
2,874,808
2,631,748
1998
$205,641
2,398,635
Calculate, for each of 2000 and 1999 a) the receivables turnover and b) the collection period. Assume
terms for all sales are n/45. What conclusion about the management of accounts receivable can be
drawn form these data?
Page 925 – BE19-9
The following data are taken from the income statements of Clearwater Company:
Sales
Beginning inventory
Purchases
Ending inventory
2003
$6,420,000
980,000
4,640,000
1,020,000
2002
$6,240,000
837,000
4,661,000
980,000
Calculate for each year a) the inventory turnover, and b) the days sales in inventory. What conclusion
concerning the management of the inventory can be drawn from this data?
Day 4:
Page 926 – BE19-11
La Pointe Products Company has shareholders’ equity of $200,000 and net income of $50,000. It has a
payout ratio of 10% and a rate of return on assets of 6%. How much did La Pointe Products pay in cash
dividends? What were its average assets?
Page 930 – P19-2A
Comparative statement data for Chen Company and Couric Company, two competitors, appear below.
All balance sheet data are as at December 31.
Net sales
Cost of goods sold
Operating expenses
Interest expense
Income tax expense
Current assets
Capital assets (net)
Current liabilities
Long-term liabilities
Common shares
Retained earnings
Chen Company
2003
2002
$1,549,035
1,080,490
292,275
6,800
41,230
325,975
$312,410
521,310
500,000
66,325
75,815
108,500
90,000
500,000
500,000
172,460
146,595
Couric Company
2003
2002
$339,038
238,006
79,000
2,252
6,650
83,336
$479,467
139,728
125,812
35,348
30,281
29,620
25,000
120,000
120,000
38,096
29,998
Instructions
a) Prepare a vertical analysis of the 2003 income statement data for Chen Company and Couric
Company.
b) Calculate the gross profit margin, profit margin, return on assets, asset turnover, and return on
common shareholders’ equity ratios for both companies
c) Comment on the relative profitability of the companies.
Page 931 – P19-3A
The comparative statemnets of Westphal Tool Company are presented below.
Wetphal Tool Company
Income Statement
For the year ended December 31
Net sales (all on account)
Cost of goods sold
Gross profit
Selling and administrative expense
(including $60,000 and $50,000,
respectively, or amortization expense)
Income from operations
Interest expense
Income before income tax
Income tax expense
Net income
2003
$1,818,500
1,005,500
2002
$1,750,500
996,000
813,000
506,000
754,500
479,000
307,000
27,000
280,000
84,000
275,500
19,000
256,500
77,000
$196,000
$179,500
Westphal Tool Company
Balance Sheet
December 31
Assets
Current assets
Cash
Temporary investments
Accounts receivable (net)
Inventory
Total current assets
Capital assets (net)
2003
$60,100
54,000
107,800
123,000
344,900
625,900
$64,200
50,000
102,800
115,500
332,500
520,300
Total assets
$970,200
$852,800
Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable
Income tax payable
Total current liabilities
Bonds payable
$160,000
43,500
203,500
200,000
$145,400
42,000
187,400
200,000
403,500
387,400
280,000
286,700
566,700
$970,200
300,000
165,400
465,400
$852,800
Total liabilities
Shareholders’ equity
Common shares
Retained earnings
Total shareholders’ equity
Total liabilities and share holders’ equity
2002
There were 60,000 common shares on December 31, 2003. Net cash provided by operating activities
for 2003 was $270,000.
Instructions
Calculate the following ratios for 2003.
a) Current ratio
b) Acid test ratio
c) Cash current debt coverage
d) Receivables turnover
e) Inventory turnover
f) Cash return on sales
g) Asset turnover
h) Return on assets
i) Return on common shareholders’ equity
j) Earnings per share
k) Debt to total assets
l) Interest coverage
m) Cash interest coverage
n) Cash total debt coverage