FINAL EXAM ACC400

The condensed financial statements of Westward Corporation for 2009 and 2008 are presented below.

            Westward Corporation                                         Westward Corporation

                   Balance Sheet                                                     Income Statement

               December 31, 2009                             For the Year Ended December 31, 2009

                     Assets                                                Revenues                                   $2,000,000

Current assets                                                       Expenses

      Cash and temporary                                           Cost of goods sold                  1,080,000

        investments                         $   30,000              Selling and administrative

      Accounts receivable                 70,000                expenses                                   495,000

      Inventories                                120,000              Interest expense                           30,000

            Total current assets           220,000                  Total expenses                    1,605,000

Property, plant, and                                              Income before income taxes         395,000

      equipment (net)                       780,000         Income tax expense                       140,000

            Total assets                   $1,000,000         Net income                                 $   255,000

            Liabilities and Stockholders' Equity

Current liabilities                       $    80,000

Long-term liabilities                       300,000

Common stockholders' equity      620,000

      Total liabilities and

      stockholders' equity           $1,000,000

            Westward Corporation                                         Westward Corporation

               Balance Sheet                                                          Income Statement

           December 31, 2008                                           For the Year Ended December 31, 2008

                     Assets                                                Revenues                                   $2,500,000

Current assets                                                       Expenses

      Cash and temporary                                           Cost of goods sold                  1,750,000

        investments                         $   40,000              Selling and administrative

      Accounts receivable                 90,000                expenses                                   500,000

      Inventories                                150,000              Interest expense                           30,000

            Total current assets           280,000                  Total expenses                    2,280,000

Property, plant, and                                              Income before income taxes         220,000

      equipment (net)                       800,000         Income tax expense                         77,000

            Total assets                   $1,080,000         Net income                                 $   143,000

            Liabilities and Stockholders' Equity

Current liabilities                     $    140,000

Long-term liabilities                       320,000

Common stockholders' equity      620,000

      Total liabilities and

      stockholders' equity           $1,080,000

Select data from fiscal year 2007:

      Inventory:                     $100,000

      Total assets:                 $900,000

      Stockholders’ Equity:   $540,000       

Instructions

1. Compute the following listed ratios for 2009 and 2008 showing supporting calculations. (5.2 points)

    

   1. Current ratio

       

   2. Debt to total Assets

       

   3. Times interest earned

       

   4. Inventory turnover

       

   5. Profit margin ratio

       

   6. Return on common stockholders' equity

       

   7. Return on assets

       

1. Perform horizontal and vertical analysis on Westward’s financial statements, show your results. (3.0 points)

    

1. Assess the financial performance of Westward, given the analysis tools used in questions 1 and 2 above. (5.3 points)

    

1. If the company wanted to perform industry comparison analysis, what references would you recommend it use? (1.5 points)