Financial Statement Analysis

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.

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Part A:          Complete the 19 ratios listed below.

Determine the following measures for 2008:

1.    Working Capital

2.    Current ratio

3.    Quick ratio

4.    Accounts receivable turnover

5.    Number of days’ sales in receivables

6.    Inventory turnover

7.    Number of days’ sales in inventory

8.    Ratio of fixed assets to long-term liabilities

9.    Ratio of liabilities to stockholders’ equity

10. Number of times interest charges earned

11. Number of times preferred dividends earned

12. Ratio of net sales to assets

13. Rate earned on total assets

14. Rate earned on stockholders’ equity

15. Rate earned on common stockholder’s equity

16. Earnings per share on common stock

17. Price-earnings ratio

18. Dividends per share of common stock

19. Dividend yield

 

Part B:         Explain what the results of each ratio indicate about the company.

 

Part C:         Complete a horizontal analysis for the Income Statement, and explain                            your findings.

 

Part D:         Complete a vertical analysis for the Income Statement, and explain your                                    findings.