Exam 16: Financial Statement Analysis

A common measure of profitability is

Why is liquidity important for businesses?

A company has an average inventory on hand of $100,000 and the days in inventory are 73 days.What is the cost of goods sold?

Dowling Company's net income last year was $40,000 and its interest expense was $8,000.Total assets at the beginning of the year were $260,000 and total assets at the end of the year were $315,000.The company's income tax rate was 35 percent.The company's return on total assets for the year was closest to

The ratios that allow investors,creditors,and managers to evaluate the extent to which invested funds are being used efficiently are called ____________.

If year one equals $800,000,year two equals $840,000,and year three equals $896,000,the percentage to be assigned for year three in a trend analysis,assuming that year 1 is the base year,is

A high accounts receivable turnover ratio indicates

Figure 16-1. Starbuck Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2011.The weighted average number of shares outstanding in 2011 was 50,000 shares.Starbuck Corporation's common stock is selling for $40 per share on the New York Stock Exchange. Refer to Figure 16-1.Starbuck's dividend payout ratio for 2011 is

Figure 16-2. Financial statements for Grange Company appear below: Dividends during 2012 totaled $127,000,of which $5,000 were preferred dividends. The market price of a share of common stock on December 31,2012,was $100. Refer to Figure 16-2. Required: Compute the following profitability ratios for 2012:

In vertical analysis,line items on the balance sheet are generally expressed as a percentage of

Investors who prefer gains through appreciation will generally prefer a ___________ payout ratio.

_________________ measure the ability of a company to meet its current obligations.

In vertical analysis,line items on the income statement are generally expressed as a percentage of

Which of the following formulas would be used to determine the inventory turnover ratio?

A primary purpose of vertical analysis is to observe trends over a three-year period.

Figure 16-6 London Company provided the following income statements for its first three years of operation: Refer to Figure 16-6.Prepare a horizontal analysis using year 1 as the base year.Explain if the results are favorable or unfavorable.

Wellston Company's net income last year was $300,000.The company has 100,000 shares of common stock and 30,000 shares of preferred stock outstanding.There was no change in the number of common or preferred shares outstanding during the year.The company declared and paid dividends last year of $1.90 per share on the common stock and $1.70 per share on the preferred stock.The earnings per share of common stock is closest to

The ___________________ is calculated by dividing the market price per share by earnings per share.

_____________________ expresses a line item as a percentage of some other line item for the same period.

Dartmouth Company has a quick ratio of 2.5 to 1.It has current liabilities of $40,000 and noncurrent assets of $70,000.If Dartmouth's current ratio is 3.1 to 1,its inventory and prepaid expenses must be