FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 13: Analysis of Financial Statements

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 91

True/False

Review LaterAdd Note

Review Later

General-purpose financial statements include the (1) income statement, (2) balance sheet, (3) statement of stockholders' equity (or statement of retained earnings), (4) statement of cash flows, and (5) notes to these statements.

A) True
B) False

Correct Answer

verified

Show Answer

Question 92

Essay

Review LaterAdd Note

Review Later

Selected balances from a company's financial statements are shown below. Calculate the following ratios for Year 2: (a) accounts receivable turnover (b) inventory turnover (c) days' sales uncollected (d) days' sales in inventory (d) profit margin. (e) return on total assets.

Correct Answer

verified

Show Answer

Question 93

Essay

Review LaterAdd Note

Express the following balance sheets for Safety Company in common-size percentages. Safety Company Balance Sheets For the years ended December 31 $\begin{array}{|l|r|r|}\hline & \text { Year 2 } & \text { Year 1 } \\\hline \text { Assets } & & \\\hline \text { Cash } & \$ 43,000 & \$ 22,000 \\\hline \text { Accounts receivable } & 38,000 & 42,000 \\\hline \text { Merchandise inventory } & 61,000 & 52,000 \\\hline \text { Prepaid insurance } & 6,000 & 9,000 \\\hline \text { Long-term investments } & 49,000 & 20,000 \\\hline \text { Plant assets (net) } & 218,000 & 218,000 \\\hline \text { Total assets } & \$ 415,000 & \$ 363,000 \\\hline\\\hline \text { Liabilities and Equity } & & \\\hline \text { Current liabilities } & \$ 62,000 & \$ 75,000 \\\hline \text { Long-term liabilities } & 45,000 & 36,000 \\\hline \text { Common stock } & 150,000 & 150,000 \\\hline \text { Retained earnings } & 158,000 & 102,000 \\\hline \text { Total liabilities and equity } & \$ 415,000 & \$ 363,000 \\\hline\end{array}$

The market price of Shaw Corporation's common stock is $47.50. Shaw declared and paid cash dividends of $3.28 per share and had earnings per share of $6.89. The Dividend yield ratio is:

Refer to the following selected financial information from Winterfell Company. Compute the company's debt to equity for Year 2. $\begin{array}{lrr} & \text { Year 2 } & \text { Year 1 } \\\text { Total assets } & \$ 327,800 & \$ 301,000 \\\text { Total liabilities } & 171,400& 169,300 \\\text { Total equity } & 156,400 & 131,700\end{array}$

The current ratio and acid-test ratio are used to reflect the ________ of a business.

Refer to the following selected financial information from Texas Electronics. Compute the company's current ratio for Year 2. $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \\\text { Cash } & \$ 37,500 & \$ 36,850 \\\text { Short-term investments } & 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchandise inventory } & 121,000 & 117,000 \\\text { Prepaid expenses } & 12,100& 13,500\\\text { Plant assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,400 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold } & 390,000 & 385,500\end{array}$

Three of the most common tools of financial analysis are (1) ________, (2) ________, and (3) ________.

Horizontal analysis is the comparison of a company's financial condition and performance across time.

A corporation reports the following year-end balance sheet data. The company's equity ratio equals: $\begin{array}{lrrr}\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \\\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \\\text { Inventory } & 60,000 & \text { Common stock } & 100,000 \\\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \\\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \\\end{array}$

Trend analysis is computing percents that show patterns in data across periods.

If a company is comparing its financial condition or performance to a base amount, it is using vertical analysis.

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

The ability to generate positive market expectations is called:

The ability to provide financial rewards sufficient to attract and retain financing is called:

Refer to the following selected financial information from Texas Electronics. Compute the company's inventory turnover for Year 2. $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \\\text { Cash } & \$ 37,500 & \$ 36,850 \\\text { Short-term investments } & 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchandise inventory } & 121,000 & 117,000 \\\text { Prepaid expenses } & 12,100& 13,500\\\text { Plant assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,400 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold } & 390,000 & 385,500\end{array}$

Selected current year company information follows: $\begin{array}{lr}\text { Net income}&\$15,953\\\text {Net sales }&712,855\\\text { Total liabilities, beginning-year}&83,932\\\text {Total liabilities, end-of-year }&103,201\\\text {Total stockholders' equity, beginning-year }&198,935\\\text {Total stockholders' equity, end-of-year }&121,851\\\end{array}$ The total asset turnover is:

The evaluation of company performance and financial condition focuses solely on past performance.

The greater the times interest earned ratio, the greater the risk a company will not be able to pay interest expense.

What is the purpose of a good financial statement analysis report? What are the key components?