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Business 5200

In: Business and Management

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1. What are the particular items an analyst should review and study in an annual report, and what material should be read with caution?

Two of the most important reports to analyze in an annual report are the Income Statement and the Balance Sheet. The Income Statement, sometimes referred to as the Profit & Loss Statement, shows performance for a specific period of time. The Balance Sheet gives you a comparison of a specific point in time versus a period of time, like the Income Statement. These two reports are also the most important to do financial ratios. The footnotes of an annual report should be read with caution, as they lay-out detailed information about the report and how items were calculated.

2. Income Statement Preparation

Net Sales | 100000 | Cost of Goods Sold | 58000 | Gross Profit | 42000 | Selling and Administrative Expenses | 22000 | Depreciation | 7000 | Operating Income (EBIT) | 13000 | Interest Expense | 3000 | Income Before Taxes | 10000 | Income Taxes (40%) | 4000 | Net Income | 6000 | Dividend Payments | 1500 | Increase in Retained Earnings | 4500 |

A. What is gross income and gross margin? $42,000 and 42% B. What is the operating income (EBIT) and operating margin? $13,000 and 13% C. What items were not included on the income statement? Why were they not included?
Investment in New Plant and Receivable were not included as they belong on a balance sheet.

3. Compute the following totals for the end of 1998 and 1999. a. Current assets
1998 - $35,198 1999 - $40,712 b. Total assets
1998 - $66,971 1999 - $74,358 c. Current liabilities
1998 - $12,463 1999 - $11,892 d. Total liabilities
1998 - $12,463 1999 - $11,892 e. Total Stockholder’s equity
1998 - $54,508 1999 - $62,466

4. Show whether or not the basic accounting equation is satisfied…...

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