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Exam 17: Financial Statement Analysis

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Question 101

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Which of the following is not an unusual item?

A) a segment of the business being sold
B) corporate income tax being paid
C) a change from one accounting method to another acceptable accounting method
D) closure of all outlet stores

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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

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Question 103

Multiple Choice

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The relationship of $325,000 to $125,000, expressed as a ratio, is

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. ​ -Using the data provided for Diane Company, what is the price-earnings ratio?

The following data are taken from the financial statements:? (a)Determine for each year: (1)Inventory turnover (Round answer to one decimal place.) (2)Number of days' sales in inventory (Round intermediate calculation to the nearest whole number and your final answer to two decimal places.) (b)Comment on the favorable and unfavorable trends revealed by the data.

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

The balance sheet data below for Randolph Company for two recent years.​​ (a)Using horizontal analysis, show the percentage change for each balance sheet item using Year 1 as a base year. (b)Using vertical analysis, prepare a comparative balance sheet.​Round percentages to one decimal place.

Solvency analysis focuses on the ability of a business to pay its long-term liabilities.

Zeus Company reports the following for the current year:​*Net of any tax effect ​ (a)Prepare a partial income statement for Zeus Company beginning with income from continuing operations before income tax. (b)Calculate the earnings per common share for Zeus.

A company reports the following: Sales..............................................................$720,000 Average accounts receivable (net)................45,000? Determine the (a) accounts receivable turnover and (b) number of days' sales in receivables. Round your answers to onedecimal place.

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

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

Selected data from Carmen Company at year-end are presented below.​​ $\begin{array}{lr}\text { Total assets } & \$ 2,000,000 \\\text { Average total assets } & \$ 2,200,000 \\\text { Net income } & \$ 250,000 \\\text { Sales } & \$ 1,300,000 \\\text { Average common stockholders' equity } & \$ 1,000,000 \\\text { Net cash provided by operating activities } & \$ 275,000 \\\text { Shares of common stock outstanding } & 10,000 \\\text { Long-term investments } & \$ 400,000\end{array}$ Calculate: (a) Asset turnover ratio (b) Return on total assets (c) Return on common stockholders' equity (d) Earnings per share on common stock.​Assume the company had no preferred stock or interest expense.​Round dollar values to two decimal places and other final answers to one decimal place.

In a vertical analysis, the base for cost of goods sold is

All of the following are typically included in the Management's Discussion and Analysis in annual reports except

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

The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

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

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

The following information is available for Jase Company:Market price per share of common stock$25.00Earnings per share on common stock$1.25​Which of the following statements is correct?