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Exam 14: Financial Statement Analysis

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Question 1

Multiple Choice

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Match each definition that follows with the term (a-h) it defines. -measures the risk that interest payments will not be made if earnings decrease

A) solvency
B) leverage
C) times interest earned
D) horizontal analysis
E) vertical analysis
F) common-sized financial statements
G) current position analysis
H) profitability analysis

I) All of the above
J) B) and D)

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C

Question 2

Multiple Choice

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Match each definition that follows with the term (a-h) it defines. -a percentage analysis of increases and decreases in related items on comparative financial statements

A) solvency
B) leverage
C) times interest earned
D) horizontal analysis
E) vertical analysis
F) common-sized financial statements
G) current position analysis
H) profitability analysis

I) A) and F)
J) D) and H)

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Question 3

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The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

The following selected data were taken from the financial statements of the Winter Group for the three most recent years of operations: The Year 3 net income was $242,000 and the Year 2 net income was $308,000. No dividends on common stock were declared during the 3 years.​ (a) Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for Years 2 and 3. Round to one decimal place.(b) What conclusion can be drawn from these data as to the company's profitability?

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -earnings per share (EPS) on common stock

Based on the following data for the current year, what is the inventory turnover?

Prepare an income statement using the following data for New Orleans Adventures for the year ended December 31:

Reporting unusual items separately on the income statement allows investors to isolate the effects of these items on income and cash flows.

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

Gallant Company reported net income of $2,500,000. The income statement included a $200,000 loss on discontinued operations, after applicable income tax. There were 100,000 shares of $10 par common stock and 40,000 shares of 4% preferred stock of $100 par outstanding throughout the current year.​ Prepare the earnings per share section of Gallant Company's income statement.

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

A company reports the following: Determine the (a) accounts receivable turnover, and (b) number of days' sales in receivables. Round your answer to one decimal place.

Match each definition that follows with the term (a-h) it defines. -focuses on a company's ability to generate net income A)solvency B)leverage C)times interest earned D)horizontal analysis E)vertical analysis F)common-sized financial statements G)current position analysis H)profitability analysis

Dividend yield on common stock is calculated as...

A company reports the following: Net income $ 350,000 Preferred dividends 50,000 Average stockholders' equity 1,000,000 Average common stockholders' equity 800,000 Determine the (a) return on stockholders' equity, and (b) return on common stockholders' equity. Round your answer to one decimal place.

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

When computing the return on common stockholders' equity, preferred stock dividends are subtracted from net income.

-Based on the data for Privett Company, what is the quick ratio, rounded to one decimal point?

Abigail Company reports the following: Determine the (a) return on stockholders' equity, and (b) return on common stockholders' equity. Round your answer to one decimal place.