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Exam 17: Financial Statement Analysis

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Question 21

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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

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Question 22

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Vertical analysis refers to comparing the financial statements of a single company over several years.

A) True
B) False

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Question 23

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

Which of the following is considered an unusual item affecting the prior period's income statement?

In the vertical analysis of an income statement,each item is generally stated as a percentage of total assets.

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

A balance sheet that displays only component percentages is a

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

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

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

Times interest earned is computed as

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

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

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

In a company's annual report,the section called Management Discussion and Analysis provides critical information for interpreting the financial statements and assessing the future of the company.

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. Use this information to answer the questions that follow. ​ Assets Liabilities and Stockholders' Equity Income Statement -Using the data provided for Diane Company,what are the dividends per common share?

The price-earnings ratio on common stock is calculated as

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

The following data are available for Martin Solutions,Inc.:​

The balance sheet for Seuss Company at the end of the current fiscal year indicated the following:​​ Income before income tax was $1,500,000,and income taxes were $200,000 for the current year.Cash dividends paid on common stock during the current year totaled $150,000.The common stock sells for $75 per share at the end of the year.​Determine each of the following:​ Round to one decimal place except earnings per share and dividends per share,which should be rounded to two decimal places.