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Chapter 15: Q6RQ (page 835)
Describe a common-size statement and how it might be helpful in evaluating a company.
The common-sized statement refers to the preparation of financial statements that indicates different items as the percentage of a common base figure.
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Question: What is horizontal analysis, and how is a percentage change computed?
Grand Oaks Realty’s net revenue & net income for the following five-year period using 2015 as the base year, follow:
Requirement:
Compute a trend analysis for the net revenue & net income. Round to the nearest full percent.
Which grew faster during the period, net revenue or the net income?
Data for Oxford State Bank follow:
2018 | 2017 | |
Net Income | \(71,900 | \)64,300 |
Dividends—Common | 22,000 | 22,000 |
Dividends—Preferred | 16,800 | 16,800 |
Total Stockholders’ Equity at Year-End (includes 95,000 shares of common stock) | 770,000 | 610,000 |
Net Income | \( 71,900 | \) 64,300 |
Market Price per Share of Common Stock | \( 16.50 | \) 10.00 |
Evaluate the common stock of Oxford State Bank as an investment. Specifically,
use the three stock ratios to determine whether the common stock has increased or decreased in attractiveness during the past year. Round to two decimal places.
Measuring profitability
Requirements
1. Compute the profit margin ratio for Accel’s Companies for 2018.
2. Compute the rate of return on total assets for 2018.
3. Compute the asset turnover ratio for 2018.
4. Compute the rate of return on common stockholders’ equity for 2018.
5. Are these rates of return strong or weak? Explain your reasoning.
Match the different parts of the annual report with the appropriate description.
1..Includes the income statement, balance sheet, statement of stockholders’ equity, and statement of cash flows | a. Notes to financial statements |
2. Attests to the fairness of the presentation of the financial statements. | b. Report of independent registered public accounting firm |
3. Includes a summary of significant accounting policies and explanations of specific items on the financial statements. | c. Management’s discussion and analysis of financial condition and results of operations (MD&A) |
4. Is written by the company to help investors understand the results of operations and the financial condition of the company. | d. Financial statements |
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