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Exam 17: Financial Statement Analysis

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Question 31

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A clean audit opinion is not the same as an unmodified opinion.

A) True
B) False

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Question 32

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Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Return on common stockholders' equity

A) Assess the profitability of the assets
B) Assess how effectively assets are used
C) Indicate the ability to pay current liabilities
D) Indicate how much of the company is financed by debt and equity
E) Indicate instant debt-paying ability
F) Assess the profitability of the investment by common stockholders
G) Indicate future earnings prospects
H) Indicate the extent to which earnings are being distributed to common stockholders

I) C) and D)
J) A) and G)

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Question 33

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Short-term creditors are typically most interested in analyzing a company's

The return on total assets measures the profitability of total assets, without considering how the assets are financed.

The percent of fixed assets to total assets is an example of

Dividend yield on common stock is calculated as

In a common-sized income statement, each item is expressed as a percentage of net income.

The tendency of the return on stockholders' equity to vary disproportionately from the return on total assets is because of

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

The percentage analysis of increases and decreases in individual items in comparative financial statements is called

In horizontal analysis, the current year is the base year.

When the return on total assets is greater than the return on common stockholders' equity, the management of the company has effectively used leverage.

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

The ability of a business to pay its debts as they come due and to earn a reasonable net income includes

The following items were taken from the financial statements of Tilden, Inc., over a three-year period:​​ Compute the following for each of the items listed.​ (a)The amount and percentage change from Year 2 to Year 3. (b)The amount and percentage change from Year 1 to Year 2.​Round percentages to one decimal place.

CorpCo gathered the following information as of the end of the current fiscal year:​​ What is CorpCo's dividend yield? Write your answer as a percent, rounded to one decimal place.

The following information was taken from Slater Company's balance sheet:​ $\begin{array} { l r } \text { Fixed assets (net) } & \$ 1,250,000 \\\text { Long-term liabilities } & 500,000 \\\text { Total liabilities } & 672,000 \\\text { Total stockholders' equity } & 1,680,000\end{array}$ Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. Round your answers to one decimal place.

Revenue and expense data for Bluestem Company are as follows:? $\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Administrative expenses } & \$ 37,000 & \$ 20,000 \\\text { Cost of goods sold } & 350,000 & 320,000 \\\text { Income tax } & 40,000 & 32,000 \\\text { Sales } & 800,000 & 700,000 \\\text { Selling expenses } & 150,000 & 110,000\end{array}$ (a)Prepare a comparative income statement, with vertical analysis, stating each item for both years as a percent of sales. (b)Comment on significant changes disclosed by the comparative income statement.?Round percentages to one decimal place.

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

Which of the following would appear as an unusual item on the income statement?