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Exam 15: Financial Statement Analysis

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Question 61

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

A) True
B) False

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Question 62

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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.

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a. Accounts receivable turnover = Sales/...

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Question 63

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Revenue and expense data for Young Technologies are as follows: $\begin{array}{|l|r|r|}\hline & \text { Year 2 } & \text { Year 1 } \\\hline \text { Sales } & \$ 500,000 & \$ 440,000 \\\hline \text { Cost of goods sold } & 325,000 & 242,000 \\\hline \text { Selling expense } & 70,000 & 79,200 \\\hline \text { Administrative expenses } & 75,000 & 70,400 \\\hline \text { Income tax expense } & 10,500 & 16,400 \\\hline\end{array}$ a. Prepare an income statement in comparative form,stating each item for both years as an amount and as a percent of sales.Round to the nearest whole percent. b. Comment on the significant changes disclosed by the comparative income statement.

Which of the following measures a company's ability to pay its current liabilities?

The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

The following items are reported on a company's balance sheet: $\begin{array}{lr}\text { Cash } & \$ 400,000 \\\text { Marketable securities } & 50,000 \\\text { Accounts receivable } & 150,000 \\\text { Inventory } & 200,000 \\\text { Accounts payable } & 250,000\end{array}$ Determine the a current ratio,and b quick ratio.Round your answer to one decimal place.

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%.

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

In computing the ratio of sales to assets,long-term investments are excluded from average total assets.

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

A company reports the following: $\begin{array}{lr}\text { Net income } & \$ 150,000 \\\text { Preferred dividends } & \$ 10,000 \\\text { Shares of common stock outstanding } & 20,000 \\\text { Market price per share of common stock } & \$ 35\end{array}$ Calculate the company's earnings per share on common stock.

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

Income statement information for Sadie Company is below: $\begin{array}{ll}\text { Sales } & \$ 175,000 \\\text { Cost of goods sold } & \underline{115,000}\\\text { Gross profit }&\underline{\$ 60,000}\end{array}$ Using vertical analysis of the income statement for Sadie Company,determine the gross profit margin.

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

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.

When a corporation discontinues a segment of its operations at a loss,the loss should be reported as a separate item after income from continuing operations on the income statement.

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

A company reports the following: Determine the ratio of sales to assets.Round your answer to one decimal place.

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?

Gallant Company reported net income of $2,500,000.The income statement included a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations,both 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.