FS Analysis Practice Problem
For this coming General Shareholders meeting of XYZ Corporation, the Chief Finance Officer
Mr. Santos, is tasked to discuss the financial statement analysis. The Chief Accountant prepared the
following financial statements for the years 2023 and 2022 for management purposes.
Requirement:
1. Based on the financial statements presented prepare the following:
a. Common size financial statements for both years
b. Horizontal comparison using peso changes and percentage changes.
2. Using the format provided, make a financial statement analysis and make interpretations
based on the given industry standards.
XYZ Corporation
Income Statements for years ending December 31
(In thousands of pesos, except for per share data)
2023
Net sales
Cost and expenses
Labor and materials
Depreciation
Selling
General and Administrative expenses
Lease payments on buildings
Total operating costs
Net Earnings before interest and taxes (EBIT)
Less, Interest Expense
Interest on notes payable
Interest on first mortgage bonds
Interest on debenture bonds
Total interest
Net earnings before taxes
Tax expense (average rate of 40%)
Net income before preferred dividends
Dividends to preferred stockholders
Net income available to common stockholders
Disposition of net income
Dividends to common stockholders
Addition to retained earnings
Per share of common stock
Stock price (year end)
Earnings per share (EPS)*
Dividends per share (DPS)*
2022
3,000
2,850
2,544
100
22
40
28
2,734
266
2,413
90
20
35
28
2,568
264
8
40
18
66
200
80
120
8
112
2
42
3
47
217
87
130
8
122
92
20
82
40
26.50
2.24
1.84
27.00
2.44
1.64
*There are 50,000 shares of common stock outstanding. EPS is based on earnings after preferred
dividends. EPS and DPS for Y 2023:
EPS
= Net income after tax/ Common shares outstanding
= P112,000/50,000 shares
= P2.24
DPS
= Dividends paid to common shareholders/common shares outstanding
= P92,000/50,000 shares
= P1.84
FS Analysis Practice Problem
XYZ Corporation
December 31 Balance Sheets
(In thousands of Pesos)
2023
ASSETS
Cash
Marketable Securities
Accounts Receivable
Inventories
Total Current Assets
Plant and Equipment
Less, Accumulated Depreciation
Net book value
TOTAL ASSETS
LIABILITIES AND EQUITY
Accounts Payable
Notes payable
Salaries and Wages Payable
Taxes Payable
Total Current Liabilities
First mortgage bonds Payable
Debenture bonds payable
Total Long-term Debt
Equity
Preferred Shares (20,000 shares, P1 par value)
Common Shares (50,000 shares, P1 par value)
Additional paid in capital
Retained Earnings
Total Equity
TOTAL LIABILITIES AND EQUITY
2022
50
0
350
300
700
1,800
500
1,300
2,000
55
25
315
215
610
1,470
400
1,080
1,680
60
100
10
130
300
500
300
800
30
60
10
120
220
520
60
580
20
50
80
750
900
2,000
20
50
80
730
880
1,680
Note: The first mortgage bonds here have a sinking fund of P20,000 as a requirement for repayment.
The current portion of long-term debt is included in notes payable.
Statement of Retained Earnings
(In thousands of Pesos)
Retained Earnings, December 31, 2022
Add, Net income for 2023
Less, Dividends to shareholders
Retained Earnings, December 31, 2023
P730
112
92
P750
FS Analysis Practice Problem
XYZ Corporation
Summary of Financial Ratios
For the year 2023
(in thousands of pesos)
RATIOS
FORMULA
COMPUTATION
RATIO
RESULT
INDUSTRY
AVERAGE
STANDARD
Liquidity
Current asset
ratio
Acid test ratio
Asset management
Inventory TO
Day sales in
inventory
A/R TO
Day sales in
A/R
Fixed assets
TO
Total Assets
TO
Debt Management
Debt to Total
Assets
Times interest
earned
Fixed Charge
Coverage
Cash flow
coverage
Profitability
Profit margin
ROA
ROE
9%
15%
Market Value
Price/earnings
ratio
Market-book
ratio
12.5x
1.8x
COMMENTS