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List some reasons why financial statement analysis is conducted.

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List some reasons why financial statement analysis is conducted. Identify some of the participants that;analyze firms financial statements.;Answer;A financial statement is analyzed to identify a company's future earnings and risks. Some participants;that would analyze a firm's financial statements are potential investors, suppliers, banks, potential;bondholders, potential shareholders, and present shareholders.;Discussion Question 14-3;Identify the types of ratios that are used to analyze a firms financial performance;based on its income statements and balance sheets.;Answer;Asset management, profitability, market value, financial leverage, and liquidity;ratios.;Problem14-11;Using the information in Tables 14.1 and 14.2, compute the financial ratios we discussed in this chapter for Walgreens, using;the 2010 and 2009 data.;Answers;Enter the answers in blue shaded cells;Ratio (text);Current ratio;Quick Ratio;Average Payment Period;Total Asset Turnover;Fixed Asset Turnover;Average Collection Period;Inventory Turnover;Total Debt to Total Assets;Equity Multiplier;Interest Coverage;Operating Profit Margin;Net Profit Margin;Operating Return on Assets;Return on Assets;Return on Equity;T;T;T;T;T;T;T;T;T;T;T;T;T;T;T;2010;2009;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;C;Discussion Question 15-1;What is meant by working capital?;Answer;A firm's current assets such as cash, marketable, securities, receivables, and;inventory.;Discussion Question 15-31;What risks arise when a firm lowers its credit standards to try to increase sales volume?;Answer;When a firm lowers its credit standards it runs the risk of selling to customers with less than;perfect credit history. These customers are more likely to default on their payments. If said;customer defaults the firm will have to recoup these losses from said customer and through;other means.;Discussion Question 15-33;How is the financial manager involved in the management of inventories?;Answer;Inventory is financed, therefore a financial manager must make sure to keep enough stock for;sales but not too much for high financing costs.;Problem 15-4;Inventories for Robinson Company are $500,000 for 2014 and $350,000 for 2013. Suppose the Robinson Company had;a cost of goods sold of $1,000,000 in 2013 and $1,200,000 in 2014.;a. Calculate the inventory turnover for each year. Comment on your findings.;b. What would have been the amount of inventories in 2014 if the 2013 turnover ratio had been maintained?;Answers;Enter the answers in blue shaded cells;Formula;a.;Inventory turnover;T;Comment;Inventories;T;2014;T;Formula;b.;2013;C;2014 Inventories;C;C;Tip: p. 419

 

Paper#29856 | Written in 18-Jul-2015

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