Discuss the importance of financial statements and how they


You should use a financial calculator and Excel to solve the problems.    

Remember: You must export your table(s) from Excel to Word before submitting your work.  

1. Discuss the importance of financial statements and how they are used by businesses.

2. What is the basic format of the income statement and what is the relevance of the basic categories?

3. Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.

4. The Happy Auto Shop has the following annual information:

Gross Sales

$700,000

Net sales

$696,000

Gross profit

$448,000

What are the shop's returns and allowances and cost of goods sold?

5. Construct a statement of financial position (balance sheet) for the Humperdink family using the following information:

cash

$50

Checking account

$2,500

student loan balance

$6,000

stocks and bonds

$2,600

savings account

$5,850

residence

$110,000

automobile

$12,000

savings account

$5,800

automobile loan balance

$12,000

401K retirement account

$15,000

furniture, clothing, jewelry

$8,000

credit card balance

$4,000

mortgage loan balance

$99,000

6. What is the purpose of financial statement analysis?  How do the three types of financial statement analysis differ from each other and when is each used?

7. Samantha Knight is applying for a small-business loan. She provides the bank with the following information:

cash in checking accounts

$5,000

cash in savings

$10,350

home market value

$145,500

first mortgage on house

$25,000

home equity loan limit

$70,000

home equity loan

$10,000

automobile market value

$19,000

automobile loan outstanding

$15,000

credit card debt

$1,500

a. Calculate the debt-to-asset ratio.

b. Calculate the debt-to-equity ratio.

c. What percentage of Samantha's assets is owned by others?   

8. Given the profit loss (income statement) and balance sheet for Sam's Sandwich Delivery (Table 4-8, page 121 of your textbook), answer the following:

a. Calculate the following ratios: current, quick, accounts receivable turnover, fixed asset turnover.

b. Using the inventory figure on the balance sheet as average inventory, calculate the inventory turnover ratio.

c. Calculate the debt-to-equity ratio, debt-to-total asset ratio, and operating profit margin ratio.

d. Perform a vertical analysis of the income statement.

e. Perform a vertical analysis of the balance sheet.

f.  Based on your analysis, would you consider investing in Sam's Sandwich Delivery?

Solution Preview :

Prepared by a verified Expert
Finance Basics: Discuss the importance of financial statements and how they
Reference No:- TGS01230513

Now Priced at $35 (50% Discount)

Recommended (91%)

Rated (4.3/5)

A

Anonymous user

2/16/2016 6:38:42 AM

Discuss the following financial questions and respond it in a detailed manner. You can use financial calculator and excel sheets to answer the following questions. Q1. Describe the significance of financial statements and illustrate how they are employed by businesses. Q2. Write down the basic format of the income statement and what is the relevance of the fundamental categories? Q3. Cash flows for the organization come from operating activities and investment activities. Describe the significance of each to the organization. Q4. Write down the major purpose of financial statement analysis? Explain how do the three kinds of financial statement analysis vary from one other and when is each employed?