Exam 13: Analyzing Financial Statements

Which of the following ratios increases when cash is collected on an account receivable?

Trenton Company has provided the following information: • Net income, $240,000; • Preferred shares issued, 6,000; • Average number of common shares issued, 24,000; • Cash dividends declared and paid on common stock, $30,000; • Market price per share, $36; • Average treasury shares of common stock, 4,000. What is Trenton's price/earnings ratio?

Finding comparable companies in order to compare performance is important because ratios in isolation are difficult to evaluate.

The records of Marshall Company include the following: Average total assets \ 3,500,000 Average total liabilities 1,220,000 Total revenue 4,580,000 Total expense (including income tax) 4,100,000 Interest expense (included in total expenses) 90,000 Income tax rate 40\% The return on equity is closest to:

Trenton Company has provided the following information: • Net income, $240,000; • Preferred shares issued, 6,000; • Average number of common stock shares issued, 24,000; • Cash dividends declared and paid on common stock, $30,000; • Market price per share, $36; • Average treasury shares of common stock, 4,000. What is Trenton's earnings per share?

Cromwell Company began the year with a balance in inventory of $110,000 and ended the year with a balance of $102,000. The net sales for the year were $983,000 with a gross profit on sales of $295,000. The inventory turnover ratio is closest to:

Which ratio reflects the stock market's assessment of a company's future performance?

At the end of 2014, Doran Corporation reported net income of $70,000, gross sales revenue of $1,525,000, and sales returns of $125,000. Required: Calculate the profit margin ratio.

The cash payment of a previously declared dividend increases which of the following ratios?

Which of the following statements is incorrect?

Home Depot's operating strategy is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable service-oriented personnel and aggressive advertising. Which of the following is not as critical to achieving Home Depot's strategy?

The quick ratio decreases when the adjusting entry to record bad debt expense is recorded.

Polk Corporation reported the following information related to its common stock (par $10) outstanding and net income: Total stockholders' equity (no preferred stock) \ 125,000 Current market price per share of common stock \ 40.00 Dividends declared and paid during 2015 \ 10,000 Balance in the common stock account \ 40,000 Net income \ 35,000 Required: Calculate each of the following ratios. Round your answers to two decimal places. A. Price/earnings ratio B. Dividend yield

Purchasing treasury stock increases the return on equity ratio.

The quality of income ratio increases when net income increases.

Which of the following is false?

A very high current ratio and low quick ratio may indicate the company is not collecting its accounts receivables in a timely manner.

The following data were reported for Favre Company: Net income \ 275,000 Total dividends declared and paid on common stock \ 0.60 per share Common stock, par \ 10 \ 1,750,000 Market price \ 20.00 per share Cash flows from operating activities \ 280,000 Required: Calculate each of the following ratios. Round your answers to two decimal places. A. Dividend yield B. Price/earnings ratio C. Quality of income

Which of the following is not a measure of solvency?

Which of the following transactions increases both the quick and current ratios assuming that both ratios are greater than 1?