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Exam 14: Financial Statement Analysis

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Question 101

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The excess of current assets over current liabilities is referred to as working capital.

A) True
B) False

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Question 102

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Leverage implies that a company

A) contains debt financing
B) contains equity financing
C) has a high current ratio
D) has a high earnings per share

E) C) and D)
F) None of the above

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Question 103

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The following data are taken from or calculated from the financial statements: (a)Assuming that credit terms on all sales are n/45, determine for each year (1) the accounts receivable turnover and (2) the number of days' sales in receivables.Round intermediate calculations to whole numbers and final answers to two decimal places.(b)Comment on any significant trends revealed by the data.​

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

When you are interpreting financial ratios, it is useful to compare a company's ratios to the same ratios from a prior period or to the ratios of another company in the same industry.

Unusual items affecting the prior period's income statement consist of changes in or errors in applying accounting principles.

A financial statement showing each item on the statement as a percentage of one key item on the statement is called a common-sized financial statement.

-Based on the data for Harding Company, what is the amount of quick assets?

Earnings per share amounts are only required to be presented for income from continuing operations and net income on the face of the statement.

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the return on common stockholders' equity for Diane Company?

Based on the following data, what is the accounts receivable turnover?

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -What is the price-earnings ratio for Diane Company?

Match each definition that follows with the term (a-h) it defines. -the percentage analysis of the relationship of each component in a financial statement to a total within the statement

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

CorpCo gathered the following information at the end of the current fiscal year: What is CorpCo's price-earnings ratio? Round your answer to one decimal place.​

The denominator of the return on total assets ratio is the average total assets.

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.Assets Liabilities and Stockholders' Equity Income Statement -The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the return on stockholders' equity?

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

The independent auditor's report

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.