Financial Statement Analysis provides information that indicates how a company is performing. By comparing financial statements of different years, a manager can make informed decisions about investments, expenditures, and activities that impact revenues.
Directions: Read the chapter in the text titled Financial Statement Analysis. Using the comparative financial statements for Baby Cakes International Inc. (see BabyCakes_Financial_Project_Data.xls linked in the lesson activities) , complete the following tasks.
Note: The market price of BabyCakes Int l, Inc. common stock was $20 on December 31, 2008.
Complete the 19 ratios listed below.
Determine the following measures for 2008:
Accounts receivable turnover
Number of days sales in receivables
Number of days sales in inventory
Ratio of fixed assets to long-term liabilities
Ratio of liabilities to stockholders equity
Number of times interest charges earned
Number of times preferred dividends earned
Ratio of net sales to assets
Rate earned on total assets
Rate earned on stockholders equity
Rate earned on common stockholder s equity
Earnings per share on common stock
Dividends per share of common stock
Explain what the results of each ratio indicate about the company.
Complete a horizontal analysis for the Income Statement, and explain your findings.
Complete a vertical analysis for the Income Statement, and explain your findings.