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Q
uantitative
R
easoning &
P
roblem
S
olving
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© 2014 Pacific Crest
5. If you were to invest in a company, what other information would you want to know in addition to
the company’s financials?
A
Successful Performance
Successful application of your learning looks like this
As you begin to apply what you’ve learned, you should have a good idea of what success looks like.
A SUCCESSFUL
PERFORMANCE
I analyze a publicly released income statement and balance sheet. I...
●
Recognize the relationship between the categories in the financial statements
●
Differentiate between assets and liabilities
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Determine trends in profit/loss
●
Use appropriate terminology
D
emonstrate Your Understanding
Apply it and show you know in context!
1. Leafy Labors, a landscaping com-
pany, purchased bushes from
a wholesaler costing $20,000
and sold them to customers for
$30,000. Wages and other operat-
ing expenses total $4000. Three
years ago, the company purchased
a small parcel of land for $1500
(which was never utilized) and
sold it this accounting period for
$6000. Use this information to
create the landscaping company’s
income statement.
Leafy Labors
Total Revenue $
Cost of Goods Sold $
Gross Profit
$
Operating Expenses $
Operating Income
$
Other revenues and expenses $
Net Income
$
2. Use the balance sheet (available on the companion website) for Merck & Co., Inc., a pharmaceutical
company, to answer the following questions:
a. What is the accounting equation for Merck, Inc.?
b. What amount does this company expect to receive from customers within the next few months?
c. How much does this company currently owe suppliers?
d. Since the company started business, how much net income was earned and not yet distributed as
dividends?