Exam 16: Financial Statement Analysis

Mike's Sportswear Company,a retailer,had cost of goods sold of $420,000 last year.The beginning inventory balance was $31,000 and the ending inventory balance was $28,000.The company's average inventory turnover in days was closest to

The dividend payout ratio is equal to common dividends divided by (Net Income - Preferred Dividends).

Figure 16-7 There were 30,000 shares of common stock outstanding throughout 2011.Dividends on common stock amounted to $21,000 and dividends on preferred stock amounted to $30,000.The market value of a share of common stock was $36 at the end of 2011.The income tax rate is 40%.The accounts receivable and inventory accounts had beginning balances of $58,500 and $101,400 respectively.Total assets at the beginning of the year were $430,500. Refer to Figure 16-7. Required: Calculate the following ratios: A.Return on sales B.Return on total assets C.Earnings per share D.Price-earnings ratio

The ratios that are used to determine a company's short-term debt paying ability are

Companies in the same industry may use different accounting methods,diminishing the usefulness of some industrial averages.

The use of estimates,cost,alternative accounting methods,the presence of atypical data,and diversification of firms are all factors that may limit the usefulness of financial statement analysis.Identify a ratio and explain how one or more of the limiting factors can affect the usefulness of that ratio.

The quick ratio differs from the current ratio in that it

A company has an account receivable turnover ratio of 6.The average accounts receivable during the period are $350,000.What is the amount of net sales for the period?

Earnings per share is an indication of how much

Figure 16-4. Condensed financial statements for Black Company appear below: There were 72,000 shares of common stock outstanding throughout the 2012.Dividends on common stock amounted to $320,400 and dividends on preferred stock amounted to $45,000.The market value of a share of common stock was $54 at the end of 2012.The income tax rate is 30%. Refer to Figure 16-4. Required: Calculate the following profitability ratios for 2012.

The current ratio is a

Which of the following is an example of liquidity analysis?

Cottle Company has total assets of $180,000 and total liabilities of $54,000.The company's debt-to-equity ratio is closest to

All debt is considered in the computation of the quick ratio.

Eagle Company has $9,000 in cash,$11,000 in marketable securities,$26,000 in current receivables,$34,000 in inventories,and $40,000 in current liabilities.The company's quick ratio is closest to

Miller Company had $120,000 in sales on account last year.The beginning accounts receivable balance was $8,000 and the ending accounts receivable balance was $14,000.The company's accounts receivable turnover ratio was closest to

Jackson Company,a retailer,had cost of goods sold of $140,000 last year.The beginning inventory balance was $8,000 and the ending inventory balance was $11,000.The company's inventory turnover ratio was closest to

For meaningful analysis,ratios should be compared with a ____________.

Profitability ratios assess the ability of a company to meets its long- and short-term obligations.

A common measure of liquidity is