FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 14: Financial Statement Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 101

True/False

Review LaterAdd Note

Review Later

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) True
B) False

Correct Answer

verified

Show Answer

Question 102

True/False

Review LaterAdd Note

Review Later

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

A) True
B) False

Correct Answer

verified

Show Answer

Question 103

True/False

Review LaterAdd Note

The dividend yield is equal to the dividends per share divided by the par value per share of common stock.

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -quick ratio

A company reports the following: $\begin{array} { l r } \text { Income before income tax } & \$ 600,000 \\\text { Interest expense } & 150,000\end{array}$ ​ Determine the times interest earned. Round your answer to one decimal place.

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

Corporate annual reports typically do not contain

$\begin{array} { l r } { \text { Privett Company } } & \\\text { Accounts payable } & 30,000 \\\text { Accounts receivable } & 35,000 \\\text { Accrued liabilities } & 7,000 \\\text { Cash } & 25,000 \\\text { Intangible assets } & 40,000 \\\text { Inventory } & 72,000 \\\text { Long-term investments } & 100,000 \\\text { Long-term liabilities } & 75,000 \\\text { Marketable securities } & 36,000 \\\text { Notes payable (short-term) } & 20,000 \\\text { Property, plant, and equipment } & 400,000 \\\text { Prepaid expenses } & 2,000\end{array}$ -Based on the data for Privett Company, what is the quick ratio, rounded to one decimal point?

A company reported the following: $\begin{array} { l r } \text { Net income } & \$ 270,000 \\\text { Preferred dividends } & \$ 10,000 \\\text { Shares of common stock outstanding } & 20,000 \\\text { Market price per share of common stock } & \$ 36.40\end{array}$ ​ Calculate the company's price-earnings ratio. Round your answer to one decimal place.

Which of the following is not an unusual item?

Comparative information taken from the Friction Company's financial statements is shown below: $\begin{array} { l r r } & \text { Year } 2 & \text { Year } 1 \\\text { (a) Notes receivable } & \$ 25,500 & \$ 30,000 \\\text { (b) Accounts receivable } & 106,200 & 90,000 \\\text { (c) Retained earnings } & 77,000 & 70,000 \\\text { (d) Sales } & 654,000 & 600,000 \\\text { (e) Operating expenses } & 160,000 & 200,000 \\\text { (f) Income taxes payable } & 28,000 & 20,000\end{array}$ Using horizontal analysis, show the percentage change and direction (increase or decrease) from Year 1 to Year 2 with Year 1 as the base year.

From the following data for Norton Company for the year ended December 31, prepare a multiple-step income statement. Include the earnings per share presentation on the income statement. ​ $\begin{array}{lr}\text { Common stock } \$ 50 \text { par } & \$ 200,000 \\\text { Cost of goods sold } & 342,000 \\\text { Administrative expenses } & 48,250 \\\text { Income tax (applicable to continuing operations) } & 142,000 \\\text { Interest expense } & 3,750 \\\text { Loss on discontinued operations, } & \\\text { net of applicable tax of } \$ 2,700 & 5,400 \\\text { Sales } & 865,000 \\\text { Selling expenses } & 83,000\end{array}$

In a common-sized balance sheet, 100% is

Brock Company's financial information is listed below. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets $\begin{array}{lr}\text { Cash and short-term investments } & \$ 40,000 \\\text { Accounts receivable (net) } & 30,000 \\\text { Inventory } & 25,000 \\\text { Property, plant, and equipment } & 215,000 \\\text { Total assets } & \$ 310,000\end{array}$ Liabilities and Stockholders' Equity $\begin{array} { l r } \text { Current liabilities } & \$ 60,000 \\\text { Long-term liabilities } & 95,000 \\\text { Common stock, } \$ 10 \text { par } & 60,000 \\\text { Retained earnings } & 95,000 \\\text { Total liabilities and stockhol ders' equity } & \$ 310,000\end{array}$ Income Statement $\begin{array} { l r } \text { Sales } & \$ 90,000 \\\text { Cost of goods sold } & 45,000 \\\text { Gross margin } & \$ 45,000 \\\text { Operating expenses } & 20,000 \\\text { Net income } & \$ 25,000\end{array}$ $\begin{array}{lr}\text { Number of shares of common stock } & 6,000 \\\text { Market price of common stock } & \$ 20\end{array}$ What is the current ratio?

The current ratio is

The following information is available for Meyer Company: $\begin{array} { l r } \text { Dividends per share of common stock } & \$ 1.80 \\\text { Market price per share of common stock } & \$ 30.00\end{array}$ Which of the following statements is correct?

Which of the following is not a characteristic evaluated in ratio analysis?

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

Based on the following data for the current year, what is the inventory turnover $\begin{array}{lr}\text { Sales on account during year } & \$ 700,000 \\\text { Cost of goods sold during year } & 270,000 \\\text { Accounts receivable, beginning of year } & 45,000 \\\text { Accounts receivable, end of year } & 35,000 \\\text { Inventory, beginning of year } & 90,000 \\\text { Inventory, end of year } & 110,000\end{array}$

In computing the asset turnover ratio, long-term investments are excluded from average total assets.