financial statement analysis 494660 | Homework Solutions

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.

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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.

Part A:

Complete the 19 ratios listed below.

Determine the following measures for 2008:


Working Capital


Current ratio


Quick ratio


Accounts receivable turnover


Number of days sales in receivables


Inventory turnover


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


Price-earnings ratio


Dividends per share of common stock


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.


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