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Exam 13: Financial Statement Analysis

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Question 41

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Indicate whether each of the following statements about financial statement analysis is true or false. _____ a)In vertical percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements. _____ b)The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis. _____ c)Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year. _____ d)Vertical analysis compares two or more financial statement items within the same time period. _____ e)One form of horizontal analysis is the preparation of common size financial statements.

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a)False b)...

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Question 42

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Financial ratio analysis is a form of horizontal analysis in that comparisons are made between different accounts in the same set of financial statements.

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Question 43

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Liquidity ratios are used to analyze the long-term debt-paying ability and the composition of the financing structure of the firm.

The Pittsburgh Company paid total cash dividends of $100,000 on 25,000 outstanding common shares.On the most recent trading day,the common shares sold at $80.What is this company's dividend yield?

Garrett Corporation had sales of $6,000,000,cost of sales of $4,200,000,and average inventory of $900,000.Garrett's inventory turnover ratio for the period is closest to:

Vertical analysis involves comparing amounts in the financial statements for a single period,but an analyst may usefully compare vertical analysis results for two or more periods.

Select the incorrect statement regarding net margin.

The accounting concept or principle that is perhaps the greatest single culprit in distorting the results of financial statement analysis is the:

Milton Company has total current assets of $65,000,including inventory of $20,000,and current liabilities of $25,000.The company's current ratio is:

You are considering an investment in Techno Company stock and wish to assess the company's position in the stock market.All of the following ratios can be used except:

Indicate whether each of the following statements is true or false. _____ a)Some forms of financial statement analysis involve identifying changes in the same item for the same company over a period of time. _____ b)Some forms of financial statement analysis involve comparing operations of different companies in the same industry. _____ c)Vertical analysis is also called trend analysis. _____ d)Horizontal analysis refers to studying the behavior of individual financial statement items over several periods. _____ e)Horizontal analysis could be done using changes in the absolute dollar amount of an item or trends in percentages.

Jones Company's current ratio is higher than the average for its industry,while its quick ratio is below the industry average.One possible interpretation for these results is that Jones carries more inventory than most companies in its industry.

Cost of goods sold/average inventory is the formula for which of these analytical measures?

The following balance sheet information is provided for Amarillo Company: Assume 2015 cost of goods sold is $665,000.The company's average days to sell inventory ?

While horizontal analysis examines one item over many time periods,vertical analysis examines many items in the same interval of time.

For Perrone Corporation,return on equity is substantially higher than return on investment.What does that tell you about the company?

Solvency ratios are used to assess a company's:

The Herald Company provided the following information from its financial records: What is the company's book value per share?

The study of an individual financial statement item over several accounting periods is called:

Financial statement analysis involves forms of comparison including: