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Exam 13: Analyzing Financial Statements

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Question 1

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Express the following income statement information in common-size percents and in trend percents using 2009 as the base year.

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Question 2

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General standards or guidelines of comparisons include the 2 to 1 for the current ratio and 1 to 1 for the acid-test ratio.

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Question 3

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The ability to generate future revenues and meet long-term obligations is referred to as:

Selected comparative income statement amounts for a company are shown below. Using 2009 as the base year for a horizontal analysis, compute the account with the most significant change. $\begin{array} { | l | r | r | } \hline & { 2009 } &{ 2010 } \\\hline \text { Sales } & \$ 400,000 & \$ 520,000 \\\hline \text { General and } & & \\\text { Administrative Expenses } & \$ 27,000 & \$ 29,700 \\\hline \text { Interest Expense } & \$ 1,000 & \$ 1,700 \\\hline \text { Miscellaneous Expense } & \$ 100 & \$ 200 \\\hline\end{array}$

For the following financial statement items, calculate trend percents using 2006 as the base year:

If a company's activities include operations that are being discontinued, the income or loss effects of the discontinued operations are included on the income statement as part of income from continuing operations.

In horizontal analysis the percent change is computed by:

A company has long-term notes payable of $175,625, taxes of $9,500, ending merchandise inventory of $450,290, interest expense of $14,050, net sales of $720,000 a gross profit ratio of 35%, a times interest earned ratio of 4.23, and total assets of $1,300,417. What is the company's earnings before interest and taxes?

A company can change from one acceptable accounting principle to another as long as the change improves the usefulness of information in its financial statements.

Comparative financial statements are reports that show financial amounts placed side by side in columns on a single statement for analysis purposes.

Calculate the percent increases for each of the following selected balance sheet items.

A change in inventory reporting from LIFO to FIFO is:

The gross margin ratio, return on total assets and basic earnings per share are all _____________ ratios.

Ratios can be expressed as a percent, rate or proportion.

Corona Company's balance sheet accounts follow: What is Corona Company's days' sales in inventory ratio for 2011 assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively?

The average number of times a company's inventory is sold during an accounting period, calculated by dividing cost of goods sold by the average inventory balance is equal to the:

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

A company has sales of $5,417,000, a gross profit ratio of 35%, ending merchandise inventory of $201,425, and total current assets of $1,539,600. What is the days sales' in inventory ratio for the year?

A _____________________________ is a part of a company's operations that serves a particular line of business or class of customers.

What are the standards for financial analysis comparison? Give examples of each.