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FINANCIAL

STATEMENT
ANALYSIS
FINANCIAL STATEMENT
ANALYSIS

Learning Objectives

describe the concept and nature of financial


statement analysis
discuss the procedures in analyzing the
financial statements
identify the users and their interests in
analyzing financial statements
discuss the limitations of financial
statement analysis
discuss the different methods or
approaches analyzing financial statements
FINANCIAL STATEMENT
ANALYSIS

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Income Statement Owner’s Equity Statement Balance Sheet Statement of Cash Flows
For the Month Ended December 31, 2018 For the Month Ended December 31, 2018 December 31, 2018 For the Month Ended December 31, 2018

Assets
Revenues Owner’s capital, September 1 ₱0 Cash Cash flows from operating activities
₱ 8,050
Sales Revenue ₱ 4,700 Add: Investments ₱ 15,000 Cash receipts from revenues ₱ 3,300
Accounts receivable 1,400 Cash payments for expenses (1,950)
Net Income 2,750 17,750 Supplies 1,600 Net cash provided by operating activities 1,350
Expenses 17,750 Equipment Cash flows from investing activities
7,000
Salaries and wages expense ₱ 900 Total assets Purchase of equipment (7,000)
1,300 ₱ 18, 050 Cash flows from financing activities
Rent expense 600 Less: Drawings
Investment by owner ₱ 15,000
Advertising expense 250 Owner’s capital, September 30 ₱ 16,450 Liabilities and Owner’s Equity Drawings by owner (1,300) ₱ 13,700
Utilities expense 200 Net increase in cash 8,050
Total expenses ₱ 1,950 Liabilities Cash at the beginning of the period 0
₱ 1,600 Cash at the end of the period ₱ 8,050
Accounts Payable
Net income ₱ 2,750 Owner’s equity
16, 450
Owner’s capital
Total liabilities ₱ 18, 050
and owner’s equity

An income statement AnAowner’s


balanceequity
sheet statement
reports the
presents the revenues summarizes the changes in
assets, liabilities, and owner’s A statement of cash flows
and expenses and owner’s equity
equity atfor
a a summarizes information about
resulting net specificspecific
perioddate.
of time
income or net loss for a the cash
specific period of time. inflows (receipts) and outflows
(payments) for a specific period
4 key financial statements of
time.
Nature of FINANCIAL
STATEMENT
ANALYSIS
Nature of FINANCIAL STATEMENT
ANALYSIS

Financial statement analysis is the process selecting related data


from financial statements for the purpose of evaluating entity’s past
financial position and operating performance in order to predict the
possible outcome of future operations.

Users’
Decision
Financial Analyzed and Interpreted Making
Statements
Process

Significance of Financial Statement Analysis


Nature of FINANCIAL STATEMENT
ANALYSIS
2018 2017

Cash and cash equivalents 105,000 102,000


Trade and other receivables 327,000 276,000
Inventory 334,000 295,000
Prepaid expenses 100,000 114,000
Total current assets 866,000 787,000

FINANCIAL STATEMENT ANALYSIS


Procedures in
analyzing the financial
statement
Procedures in analyzing the financial statement

The following procedures may be adopted in analyzing the financial statements:


• Establish the objective of the financial statement analysis
Cash and cash equivalents 105,000 102,000
Trade and other receivables 327,000 276,000
Inventory 334,000 295,000
Prepaid expenses 100,000 114,000
Total current assets 866,000 787,000

• Gather complete information about the firm and study the


industry which the firm operates
• Perform mathematical analysis using applicable tools
• Make conclusions relative to the established objectives
Users and interested
parties
Users and interested parties

1. Short-term investors -primarily interested in the liquidity of the business


2. Long-term investors -primarily interested on the growth of the business,
solvency status, financial leverage and risks of investments
3. Lenders/Financial institutions -primarily interest on the ability of the business to pay interests
4. Shareholders -primarily interested in the profitability of the business and
current and future level of risk and return
5. Employees -primarily interested on the ability of the business to give
proper compensation, provide retirement benefits and extend
employee opportunities
6. Government -primarily interested on compliance with tax regulations and
reportorial requirements
Limitations of financial
statement analysis
Limitations of financial statement analysis

1. The result of quantitative analysis are just only indicators of the


company’s liquidity, solvency and profitability. The results are not
absolute status of entity’s financial performance.

2. Different thresholds among companies. An entity may set it’s current


ratio at a level which may not be acceptable to another company.

3. Financial data do not reflect changes in the purchasing power.


Limitations of financial statement analysis

4. Differences in the application of accounting methods and estimates.

5. Differences in valuation and measurement.

6. The tendency for the management to show favorable financial


statements in order to win the confidence of investors and creditors.
Methods of analyzing
financial statements
Methods of analyzing financial statements

HORIZONTAL OR COMPARATIVE APPROACH

VERTICAL OR COMMON –SIZE APPROACH

TREND PERECENTAGE APPROACH

RATIO ANALYSIS
Methods of analyzing financial statements

The horizontal or comparative analysis approach is an


analytical tool that evaluates the present performance of an
entity compared to last year’s.

There are two methods of performing horizontal or


comparative analysis:

1. Absolute amount comparison


2. Percentage comparison
Methods of analyzing financial statements
Methods of analyzing financial statements

1. Absolute amount
comparison

= Current year amount – Previous year amount

= ₱ 28,287,788,370 – ₱ 23,324,528,579

= ₱ 4,963,259,791
Methods of analyzing financial statements

2. Percentage comparison

Current year amount −Previous year amount


=
Previous year amount

₱ 28,287,788,370 −₱ 23,324,528,579
=
₱ 23,324,528,579

₱ 4,963,259,791 Absolute amount of change


= =
₱ 23,324,528,579 Previous year amount

= 21.279 %
Methods of analyzing financial statements

The vertical or common-size approach is


an analytical tool that determines the size or
proportion of an item in the financial
statements in relations to the total.
Methods of analyzing financial statements
Methods of analyzing financial statements

Vertical Analysis

Cash and cash equivalents


=
Total assets

₱ 722,164,343
=
₱ 16,781,948,519

=𝟒. 𝟑𝟎𝟑 %
Methods of analyzing financial statements

The trend percentage approach is used to analyze the


financial statements that extend beyond two years through the
use of index numbers or percentages
250.0%
240.0%
Percentages

230.0%
220.0%
210.0%
200.0% BW
190.0% Industry
180.0%
170.0%
160.0%
150.0%
2005 2006 2007

Analysis Year
Methods of analyzing financial statements

The ratio analysis involves methods of


calculating and interpreting financial ratios to
analyze and monitor the firm’s performance.

Percentage: Current assets are 285% of current liabilities.


Rate: Current assets are 2.85 times current liabilities.
Proportion: The relationship of current assets to liabilities
is 2.85:1.
Methods of analyzing financial statements

Liquidity Ratios

Measure short-term ability of the company to pay its maturing obligations and to
meet unexpected needs for cash

Profitability Ratios

Measure the income or operating success of a company for a given period of time

Solvency Ratios

Measure the ability of the company to survive over a long period of time
Methods of analyzing financial statements
BARTLETT
COMPANY
Balance Sheet

Liquidity Ratios December 31, 2018

Assets
Cash ₱ 363,000
Current Assets
1. Current Ratio =
Marketable securities 68,000
Accounts receivable 503,000
Inventories 289,000
Current Liabilities Total current assets ₱ 1,223,000
Land and buildings 2,072,000
Machinery and equipment 1,866,000
Furniture and fixtures 358,000
Vehicles 275,000
₱ 1,223,000
=
Other (includes financial leases) 98,000
Total gross fixed assets (at cost) ₱ 4,669,000
Less: Accumulated depreciation
₱ 620,000 Net fixed assets
2,295,000
₱ 2,374,000
Total assets ₱ 3,597,000

Liabilities and Owner’s Equity

=1.97 Accounts payable


Notes payable
₱ 382,000
79,000
Accruals 159,000
Total current liabilities ₱ 620,000
Long-term debt (includes financial leases) 1,023,000
Total liabilities ₱ 1,643,000
Preferred stock: cumulative 5%, ₱100 par, 2000 200,000
shares authorized and issued
Common stock: ₱2.50 par, 100,000 shares 191,000
authorized , shares issued and outstanding
in 201: 76,262; in 2014: 76,244
Paid-in capital in excess of par on common stock 428,000
Retained earnings 1,135,000
Total stockholder’s equity ₱ 1,954,000
Total liabilities and stockholder’s equity ₱ 3,597,000
Methods of analyzing financial statements
BARTLETT
COMPANY
Balance Sheet

Liquidity Ratios December 31, 2018

Assets
Cash ₱ 363,000
2. Quick (Acid- Current Assets −Inventories Marketable securities 68,000
= Accounts receivable 503,000

Test) Ratio Current Liabilities Inventories


Total current assets
289,000
₱ 1,223,000
Land and buildings 2,072,000
Machinery and equipment 1,866,000
Furniture and fixtures 358,000
₱ 1,223,000 −289,000 Vehicles
=
275,000
Other (includes financial leases) 98,000
Total gross fixed assets (at cost) ₱ 4,669,000
₱ 620,000 Less: Accumulated depreciation 2,295,000
Net fixed assets ₱ 2,374,000
₱ 934,000 Total assets ₱ 3,597,000
= Liabilities and Owner’s Equity
₱ 620,000
Accounts payable ₱ 382,000
Notes payable 79,000

=1.51 Accruals 159,000


Total current liabilities ₱ 620,000
Long-term debt (includes financial leases) 1,023,000
Total liabilities ₱ 1,643,000
Preferred stock: cumulative 5%, ₱100 par, 2000 200,000
shares authorized and issued
Common stock: ₱2.50 par, 100,000 shares 191,000
authorized , shares issued and outstanding
in 201: 76,262; in 2014: 76,244
Paid-in capital in excess of par on common stock 428,000
Retained earnings 1,135,000
Total stockholder’s equity ₱ 1,954,000
Total liabilities and stockholder’s equity ₱ 3,597,000
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Liquidity Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
3. Accounts receivable turnover Gross profits
Less: Operating expenses
₱ 986,000

100,000
Selling expense
194,000
Net sales General and administrative expenses
= Lease expense
Depreciation expense
35,000
239,000
Average net account𝑠 receivable Total operating expense
568,000
Operating profits ₱ 418,000
₱ 3,074,000 93,000
=
Less: Interest expense
Net profits before taxes ₱ 325,000
₱ 503,000+₱ 400,000 Less: Taxes 94,000
Net profits after taxes ₱231,000
2 Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000
₱ 3,074,000 ₱ 3,074,000
= ₱ 903,000 = ₱ 451,500 Earnings per share
Dividends per share
₱ 2.90
₱ 1.29
2

=6.81 ≈ 7 times
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Liquidity Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
4. Inventory Turnover Cost of goods sold Gross profits ₱ 986,000
= Less: Operating expenses
Selling expense
100,000
Inventory General and administrative expenses
194,000
35,000
Lease expense
239,000
Depreciation expense
568,000
Total operating expense
₱ 2,088,00 ₱ 418,000
=
Operating profits
Less: Interest expense 93,000
₱ 325,000
₱ 289,000 Net profits before taxes
Less: Taxes 94,000
Net profits after taxes ₱231,000
Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000

=7.2 Earnings per share


Dividends per share
₱ 2.90
₱ 1.29
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Liquidity Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Accounts receivable Gross profits ₱ 986,000
5. Average collection = Less: Operating expenses
Selling expense
100,000
Average sales per day
period
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
568,000
Total operating expense

Average sales per day Operating profits ₱ 418,000


Annual sales
= Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
365 Less: Taxes 94,000
₱231,000
Net profits after taxes
Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000
₱ 3,074,00
= Earnings per share ₱ 2.90
365 Dividends per share ₱ 1.29

= ₱ 𝟖, 𝟒𝟐𝟐
₱ 503,00
Average collection period = = 𝟓𝟗. 𝟕 𝐝𝐚𝐲𝐬
₱ 8,422
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Liquidity Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Accounts payable ₱ 986,000
6. Average payment =
Gross profits
Less: Operating expenses
100,000
Selling expense
Average purchases per day
period
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
568,000
Total operating expense
Operating profits ₱ 418,000
Annual purcahses
= Less: Interest expense 93,000
Average purchases per day 365
Net profits before taxes
Less: Taxes
₱ 325,000
94,000
Net profits after taxes ₱231,000
Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000
0.70 x ₱2,088,000
= Earnings per share ₱ 2.90
365 Dividends per share ₱ 1.29

= ₱ 𝟒, 𝟎𝟎𝟒
₱ 382,00
Average payment period = = 𝟗𝟓. 𝟒 𝐝𝐚𝐲𝐬
₱ 4,004
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Liquidity Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
₱ 986,000
Sales Gross profits
7. Total Asset Turnover = Less: Operating expenses
Selling expense
100,000
Total Assets General and administrative expenses
194,000
35,000
Lease expense
239,000
Depreciation expense
568,000
Total operating expense
Operating profits ₱ 418,000
93,000
₱ 3,074,00 Less: Interest expense
= Net profits before taxes
Less: Taxes
₱ 325,000
94,000
₱ 3,597,000 Net profits after taxes ₱231,000
Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000

Earnings per share ₱ 2.90


= 𝟎. 𝟖𝟓 Dividends per share ₱ 1.29
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
1. Gross Profit Margin Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
568,000
Sales −Cost of goods sold Gross Profit Total operating expense
= = Operating profits
Less: Interest expense
₱ 418,000
93,000
Sale Sale Net profits before taxes ₱ 325,000
Less: Taxes 94,000
Net profits after taxes ₱231,000
₱ 3,074,00 −₱ 2,088,00 ₱ 986,000 10,000
=
Less: Preferred stock dividends
= ₱ 3,074,000
Earnings available for common stockholders ₱ 221,000

₱ 3,074,000 Earnings per share ₱ 2.90


Dividends per share ₱ 1.29

= 𝟎. 𝟑𝟐𝟏 𝐨𝐫 𝟑𝟐. 𝟏 %
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
2. Operating Profit Margin = Operating Profits Less: Operating expenses
100,000
Selling expense
Sale General and administrative expenses
194,000
35,000
Lease expense
239,000
Depreciation expense
568,000
Total operating expense
Operating profits ₱ 418,000
₱ 418,000
= Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
₱ 3,074,000 Less: Taxes 94,000
₱231,000
Net profits after taxes
Less: Preferred stock dividends 10,000
Earnings available for common stockholders ₱ 221,000

Earnings per share ₱ 2.90


= 𝟎. 𝟏𝟑𝟔 𝐨𝐫 𝟏𝟑. 𝟔 % Dividends per share ₱ 1.29
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
3. Net Profit Margin Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Earnings available for common stockholder
=
568,000
Total operating expense
Operating profits ₱ 418,000
Sale Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 221,000 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
₱ 3,074,000
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= 𝟎. 𝟎𝟕𝟐 𝐨𝐫 𝟕. 𝟐 %
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
4. Earnings per share Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Earnings available for common stockholder
=
568,000
Total operating expense
Operating profits ₱ 418,000
Number of common stock outstanding Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 221,000 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
76,262
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= ₱ 𝟐. 𝟗𝟎
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
5. Return on Total Assets (ROA) Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Earnings available for common stockholder
=
568,000
Total operating expense
Operating profits ₱ 418,000
Total assets Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 221,000 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
₱ 3,597,000
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= 𝟎. 𝟎𝟔𝟏 = 𝟔. 𝟏 %
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
6. Return on Equity (ROE) Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Earnings available for common stockholder
=
568,000
Total operating expense
Operating profits ₱ 418,000
Common stock equity Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 221,000 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
₱ 1,754,000
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= 𝟎. 𝟏𝟐𝟔 = 𝟏𝟐. 𝟔 %
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
7. Price/earnings Ratio (P/E) Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Market price per share of common stock
=
568,000
Total operating expense
Operating profits ₱ 418,000
Earnings per share Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 32.25 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
₱ 2.90
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= 𝟏𝟏. 𝟏𝟐
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Profitability Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
8. Market/book Ratio (M/B) Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
Market price per share of common stock
=
35,000
Lease expense
239,000
Depreciation expense
Book value per share of common stock Total operating expense
568,000
Operating profits ₱ 418,000

Book value per share of Less: Interest expense


Net profits before taxes
93,000
₱ 325,000
common stock Less: Taxes
Net profits after taxes
94,000
₱231,000
Less: Preferred stock dividends 10,000
Common stock equity ₱ 221,000
=
Earnings available for common stockholders

Number of shares of common stock outstanding Earnings per share


Dividends per share
₱ 2.90
₱ 1.29

₱ 1,754,000
= ₱ 32.25
76,262
= = 𝟏. 𝟒𝟎
₱ 23.00
= ₱𝟐𝟑. 𝟎𝟎
Methods of analyzing financial statements
BARTLETT
COMPANY
Balance Sheet

Solvency Ratios December 31, 2018

Assets
Cash ₱ 363,000
Total liabilities
1. Debt Ratio =
Marketable securities 68,000
Accounts receivable 503,000
Inventories 289,000
Total assets Total current assets ₱ 1,223,000
Land and buildings 2,072,000
Machinery and equipment 1,866,000
Furniture and fixtures 358,000
Vehicles 275,000
₱ 1,643,000
=
Other (includes financial leases) 98,000
Total gross fixed assets (at cost) ₱ 4,669,000
Less: Accumulated depreciation
₱ 3,597,000 Net fixed assets
2,295,000
₱ 2,374,000
Total assets ₱ 3,597,000

Liabilities and Owner’s Equity

=0.457 = 45.7 % Accounts payable


Notes payable
₱ 382,000
79,000
Accruals 159,000
Total current liabilities ₱ 620,000
Long-term debt (includes financial leases) 1,023,000
Total liabilities ₱ 1,643,000
Preferred stock: cumulative 5%, ₱100 par, 2000 200,000
shares authorized and issued
Common stock: ₱2.50 par, 100,000 shares 191,000
authorized , shares issued and outstanding
in 201: 76,262; in 2014: 76,244
Paid-in capital in excess of par on common stock 428,000
Retained earnings 1,135,000
Total stockholder’s equity ₱ 1,954,000
Total liabilities and stockholder’s equity ₱ 3,597,000
Methods of analyzing financial statements
BARTLETT
COMPANY
Balance Sheet

Solvency Ratios December 31, 2018

Assets
Cash ₱ 363,000
Total liabilities
1. Debt-to - =
Marketable securities 68,000
Accounts receivable 503,000
Inventories 289,000
Equity Ratio Common stock equity Total current assets ₱ 1,223,000
Land and buildings 2,072,000
Machinery and equipment 1,866,000
Furniture and fixtures 358,000
Vehicles 275,000
₱ 1,643,000
=
Other (includes financial leases) 98,000
Total gross fixed assets (at cost) ₱ 4,669,000
Less: Accumulated depreciation
₱ 1,754,000 Net fixed assets
2,295,000
₱ 2,374,000
Total assets ₱ 3,597,000

Liabilities and Owner’s Equity

=0.937 = 93.7 % Accounts payable


Notes payable
₱ 382,000
79,000
Accruals 159,000
Total current liabilities ₱ 620,000
Long-term debt (includes financial leases) 1,023,000
Total liabilities ₱ 1,643,000
Preferred stock: cumulative 5%, ₱100 par, 2000 200,000
shares authorized and issued
Common stock: ₱2.50 par, 100,000 shares 191,000
authorized , shares issued and outstanding
in 201: 76,262; in 2014: 76,244
Paid-in capital in excess of par on common stock 428,000
Retained earnings 1,135,000
Total stockholder’s equity ₱ 1,954,000
Total liabilities and stockholder’s equity ₱ 3,597,000
Methods of analyzing financial statements
BARTLETT
COMPANY
Income Statement

Solvency Ratios For the year eneded December 31, 2018

Sales Revenue ₱ 3,074,000


Less: Cost of goods sold 2,088,000
Gross profits ₱ 986,000
1. Time interest earned ratio Less: Operating expenses
Selling expense
100,000
194,000
General and administrative expenses
35,000
Lease expense
239,000
Depreciation expense
Earnings before interest and taxes
=
568,000
Total operating expense
Operating profits ₱ 418,000
Interest Less: Interest expense 93,000
Net profits before taxes ₱ 325,000
Less: Taxes 94,000
₱231,000
₱ 418,000 Net profits after taxes
= Less: Preferred stock dividends
Earnings available for common stockholders
10,000
₱ 221,000
₱ 93,000
Earnings per share ₱ 2.90
Dividends per share ₱ 1.29
= 𝟒. 𝟒𝟗
FINANCIAL STATEMENT
ANALYSIS

Exercises