Financial analysis
a. relies on generally accepted accounting principles to make comparisons between companies valid.
b. uses historical financial statements to measure a company’s performance and in making financial projections of future performance.
c. uses historical financial statements and is thus useful only to assess past performance.
d. is accounting record keeping using generally accepted accounting principles.
Table 4 1
Garland Company
Balance Sheet
|
Assets: |
$500,000 |
|
Cash and marketable securities |
800,000 |
|
Accounts receivable |
1,350,000 |
|
Inventories |
50,000 |
|
Prepaid expenses |
$2,700,000 |
|
Total current assets |
5,000,000 |
|
Fixed assets |
(2,000,000) |
|
Less: accum. depr. |
$3,000,000 |
|
Net fixed assets |
$5,700,000 |
|
Total assets |
$500,000 |
|
Liabilities: |
|
|
Accounts payable |
$400,000 |
|
Notes payable |
900,000 |
|
Accrued taxes |
75,000 |
|
Total current liabilities |
$1,375,000 |
|
Long term debt |
1,200,000 |
|
Owner’s equity |
3,125,000 |
|
Total liabilities and owner’s equity |
$5,700,000 |
|
Net sales (all credit) |
$8,000,000 |
|
Less: Cost of goods sold |
(3,500,000) |
|
Selling and administrative expense |
(2,000,000) |
|
Depreciation expense |
(250,000) |
|
Interest expense |
(150,000) |
|
Earnings before taxes |
2,100,000 |
|
Income taxes |
(700,000) |
|
Net income |
$1,400,000 |
|
Common stock dividends |
$500,000 |
|
Common Shares Outstanding |
1,000,000 |