Why is trend analysis helpful in analyzing ratios?
Trend analysis represents the changes in the ratios over time. It allows one to see changes that occur in the profitability, capital employed, etc. of the company over time.
Trend analysis shows changes in a ratio over time, which helps the company to compare its current performance with the past and forecast future events.
Ratio analysis is the analysis of various pieces of financial information. It compares the company’s profitability in relation to the past years. This is done through trend analysis. Trend analysis helps analyze the company’s data by focusing on the change in specific line items in the financial statements.
Using the income statement for Times Mirror and Glass Co., compute the following ratios:
The total assets for this company equal $80,000. Set up the equation for the Du Pont system of ratio analysis, and compute c, d, and e.
c. Profit margin.
Times mirror and glass company
Less: Cost of goods sold
Less: selling and administrative expenses
Less: Interest expenses
Earning before taxes
Less: Taxes (30%)
Earning after taxes
*equal income before interest and taxes
Landers Nursery and Garden Stores has current assets of $220,000 and fixed assets of $170,000. Current liabilities are $80,000 and long-term liabilities are $140,000. There is $40,000 in preferred stock outstanding and the firm has
issued 25,000 shares of common stock. Compute book value (net worth)
Quantum Technology had $669,000 of retained earnings on December 31, 20X2. The company paid common dividends of $35,500 in 20X2 and had retained earnings of $576,000 on December 31, 20X1. How much did Quantum Technology earn during 20X2, and what would earnings per share be if 47,400 shares of common stock were outstanding?
Prepare an income statement for Virginia Slim Wear. Take your calculations all the way to computing earnings per share.
Cost of goods sold
Selling and administration expenses
Preferred stock dividend
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