What is the basic format of the income statement

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

Q1. What is the basic format of the income statement and what is the relevance of the basic categories?

Q2. Cash flows for an organization come from operating activities and investment activities. Discuss the importance of each to the organization.

Q3. 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?

Q4. 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

Q5. 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?

Q6. 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

1. Calculate the debt-to-asset ratio.

2. Calculate the debt-to-equity ratio.

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

Q7. 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:

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

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

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

4. Perform a vertical analysis of the income statement.

5. Perform a vertical analysis of the balance sheet.

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

Reference no: EM132211801

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