财务报表分析整理内容

Chapter1

75. Problem One: Information contained in Financial Statements

List ten different items you would expect to find in an average annual report to shareholders.

Problem One: Information contained in Financial Statements

Exercise 1-3 (25 minutes)

a. Current ratio:

2006:

= 1.9 to 1

2005:

= 2.5 to 1

2004:

= 2.9 to 1

b. Acid-test ratio:

2006: = 0.9 to 1

$30,800 + $88,500 + $111,500 + $9,700 $128,900 $35,625 + $62,500 + $82,500 + $9,375 $75,250 $36,800 + $49,200 + $53,000 + $4,000 $49,250 $30,800 + $88,500

$128,900

2005: = 1.3 to 1

2004: = 1.7 to 1

Analysis and Interpretation: Mixon's short-term liquidity position has

weakened over this two-year period. Both the current and acid-test ratios show declining trends. Although we do not have information about the nature of the company's business, the acid-test ratio shift from ‘1.7 to 1’ down to ‘0.9 to 1’ and the current ratio shift from ‘2.9 to 1’ down to ‘1.9 to 1’ indicate a potential liquidity problem. Still, we must recognize that industry standards may show that the 2004 ratios were too high (instead of 2006 ratios as too low).

$35,625 + $62,500

$75,250

$36,800 + $49,200

$49,250

Chapter2

70. Problem Two: Earnings Management

Earnings management can be defined as the "purposeful intervention by management in the earnings process, usually to satisfy selfish objectives" (Schipper, 1989). Earnings management techniques can be separated into those that are "cosmetic" (without cash flow consequences) and those that are "real" (with cash flow consequences).

The management of a company wishes to increase earnings this period.

List three "cosmetic" and three "real" techniques that can be used to achieve this objective and explain why they will achieve the objective.

Problem Two: Earnings Management

Cosmetic (non-cash flow) techniques would be:

● Decrease estimated bad debt expense

● Decrease estimated warrantee expense

● Increase in estimated salvage value of depreciable assets

● Increase discount rate on pension plans

● Increase expected rate of return on pension assets

● Change from accelerated depreciation to straigh t line depreciation

● Capitalize expenses such as software development and R&D

Real changes would be:

● Decrease R&D expenditures

● Decrease advertising expenditures

● Decrease maintenance spending

● Changing accounting principle from LIFO to FIFO (assumin g rising prices). Note that this will have a tax effect, as one cannot use FIFO for financial reporting purposes and LIFO for tax purposes.

● Channel loading (i.e. borrowing sales from the next period, which if repeated usually escalates in future periods)

74. Problem Six: Fair Value Accounting

ABC Co. starts its business raising $110,000 in cash; $60,000 from issuing equity and $50,000 from issuing 6% bonds at par. ABC used the whole amount of cash to buy a building, which it rents out for $10,000 per year. Given below is the opening balance sheet of ABC Co. for the first year of operations.