Accounting 11 – Management Accounting 1

Financial Statement Analysis

Problem 1:
Gabao Corporation reported the following figures:

2017 2016
Cash and Cash Equivalents P 2,450 P 2,094
Receivables 1,813 1,611
Inventory 1,324 1,060
Prepaid Expenses 1,709 2,120
Total Current Assets P 7,296 P 6,885
Other Assets 18,500 15,737
Total Assets P25,796 P22,622
Total Current Liabilities P 7,230 P 8,467
Long-term Liabilities 4,798 3,792
Common Stock 6,568 4,363
Retained Earnings 7,200 6,000
Total Liabilities and Equity P25,796 P22,622

Sales P 20,941
Cost of Sales 7,055
Operating Expenses 7,065
Operating Income P 6,821
Interest Expense 210
Income Tax 2,563
Net Income P 4,048

Required:
1. Horizontal Analysis of Gabao Corporation’s balance sheet for 2017 would report.
2. Vertical Analysis of Gabao’s balance sheet for 2017 would report.
3. A common-size income statement for Gabao would report.
4. Gabao’s acid-test ratio.
5. Gabao’s inventory turnover.
6. During 2017, Gabao’s days’ sales in receivables ratio is:
7. Gabao’s times-interest-earned ratio.
8. Gabao has 2,500 common shares outstanding, what is Gabao’s EPS?
9. Gabao’s stock has traded recently around P48 per share, use your answer in Question 8 to
measure the company’s price earnings ratio.

MANAGEMENT ACCOUNTING 1 – FINANCIAL STATEMENT ANALYSIS 1

 Accounting 11 – Management Accounting 1

Problem 2:
The data presented below show actual figures for selected accounts of Menggay Company for the
fiscal year ended May 31, 2014, and selected budget figures for the 2015 fiscal year. Menggay’s
controller is in the process of reviewing the 2015 budget. Menggay Company monitors yield or
return ratios using the average financial position of the company. (Round all calculations to three
decimal places if necessary)

5/31/15 5/31/14
Current assets P 210,000 P 180,000
Noncurrent assets 275,000 255,000
Current liabilities 78,000 85,000
Long-term debt 75,000 30,000
Common stock (P30 par value) 300,000 300,000
Retained earnings 32,000 20,000

2015 Operations
Sales (all credit) P 350,000
Cost of goods sold 160,000
Interest expense 3,000
Income taxes (40% tax rate) 48,000
Dividends declared and paid in 2015 60,000
Administrative expenses 67,000

Current Assets
5/31/15 5/31/14
Cash P 20,000 P10,000
Accounts Receivable 100,000 70,000
Inventory 70,000 80,000
Others 20,000 20,000

Required:
a. Debt to total asset for 2015.
b. 2015 AR Turnover of the company.
c. Using 365-day year, Menggay’s Inventory turnover is:
d. Total asset turnover for 2015.
e. 2015 return on assets of the company.

MANAGEMENT ACCOUNTING 1 – FINANCIAL STATEMENT ANALYSIS 2