Question

Q1. Review the following accounts, subtotals, and totals; (1) describe your observations; and then (2) identify what your observations indicate. A response is given for Current Assets to help with understanding.
a. Current assets. decreased in Year 7 due to a sharp decline in short-term investments and a dip in inventory. The buildup of accounts receivable accompanied by a decrease in inventory is cause for concern, indicating credit terms might be too lax.
b. Noncurrent assets. ___________________________________________________________
c. Total assets. ________________________________________________________________
d. Total liabilities. _____________________________________________________________
e. Retained earnings... ___________________________________________________________
f. Stockholders’ equity... _________________________________________________________
Q2. Compute the ratios requested in the chart below. For ratio formulas and explanation refer to Appendix B—Ratios.
* Industry: Electronics Stores—Industry ratio averages from money.msn.com
For each ratio, (a) compare the two years of company ratios and circle the ratio indicating lower financial risk, (b) cross out any company ratio indicating greater financial risk than the industry norm, and (c) comment on the results.
Q3. Overall, the balance sheet and related ratios indicate a (strengthening / steady / _________) financial position. Why? List observations that support your conclusion and explain why.
Q4. Revenues were _________ million for the earliest year reported and _________ million for the most recent year reported. Since the earliest year reported, this account has changed by _________ million, which is a _________ (_________/ decrease). During the same time period, COGS (_________/ decreased) by ________, total operating expenses (other than COGS) (_________/ decreased) by ________, and net income (increased / _________).
Q5. Compute the ratios requested in the chart below. For ratio formulas and explanation refer to Appendix B—Ratios.
* Industry: Electronics Stores—Industry ratio averages from money.msn.com
For each ratio, (a) circle the stronger ratio, (b) cross out any ratio that is weaker than the industry norm, and (c) comment on the results.
Q6. The income statement and related ratios indicate (strengthening / steady / ________) earnings potential. Why? List observations that support your conclusion and explain why.
Q7. The primary source of cash was operating activities during Year (7 / _____ / _____/ _____
Investing activities provided a source of cash during Year (____ / 6 / 5 / 4), indicating .
In Year 7 CC sold more assets (in this case primarily investments) than it purchased to cover for the lack of NCOA.
A net cash outflow for capital stock occurred during Year (_____ / _____/ _____/ 4), meaning more capital stock was (issued / __________). Repurchased common stock is referred to as (common / preferred / __________) stock. Treasury stock (increases / __________) total stockholders’ equity on the balance sheet and decreases total shares outstanding, which is (__________/ unfavorable) for shareholders because earnings per share (__________/ decreases).
Q8. Compute the ratios requested in the chart below. For ratio formulas and explanation refer to Appendix B—Ratios.
For each ratio, (a) circle the company ratio with the least amount of risk and (b) comment on the results.
Q9. The statement of cash flows and related information report a (strengthening / steady / __________) cash position. Why? List observations that support your conclusion and explain why.
Q10. Complete the statement of retained earnings below.
a. A net loss was reported during Year (____ / ____ / 5 / 4) and dividends increased during Year (____ / ____ / 5 / 4). What might be one reason that dividends paid increased?
b. Retained earnings decreased during Year (____ / ___ / 5). Why?
Q11. Circuit City filed for bankruptcy 6 months into Year 8. What signs of this impending bankruptcy do you find in these financial statements? When did these signs start to appear?


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  • CreatedSeptember 17, 2015
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