Exam 23: Analysis of Financial Statements

On December 31, 2010 and 2011, Taft Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding. Additional information: The price-earnings ratio on common stock at December 31, 2011, was

In comparing the current ratios of two companies, why is it invalid to assume that the company with the higher current ratio is the better company?

The following information has been collected for Gordon Company: Required: Estimate the price per share for Gordon Company's common stock using the discounted free cash flow model.

The following information has been collected regarding Benjamin Company: Estimate a price per share for the stock of Benjamin using the following equity valuation models:

Orchard Corporation's capital stock at December 31 consisted of the following: (a) Common stock, $2 par value; 100,000 shares authorized, issued, and outstanding. (b) 10% noncumulative, nonconvertible preferred stock, $100 par value; 1,000 shares authorized, issued, and outstanding. Orchard's common stock, which is listed on a major stock exchange, was quoted at $4 per share on December 31. Orchard's net income for the year ended December 31 was $50,000. The yearly preferred dividend was declared. No capital stock transactions occurred. What was the price- earnings ratio on Orchard's common stock at December 31?

Rauh Corporation had a current ratio of 2.0 at the end of 2010. Current assets and current liabilities increased by equal amounts during 2011. The effects on net working capital and on the current ratio, respectively, were

The inventory turnover ratio

Selected information from the accounting records of Thorne Company is as follows: Thorne's inventory turnover for 2011 is

All other things held constant, which of the following ratios would not be improved if a company structures a leasing transaction as an operating lease rather than a capital lease?

The following information has been collected regarding Collins Company: Estimate a price per share for Collins' stock using the following equity valuation models:

From the standpoint of the stockholders of a company, the ratio that measures the overall performance of a company would be calculated using which of the following?

A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do?

During the year, The Grap Company purchased $1,920,000 of inventory. The cost of goods sold for the year was $1,800,000 and the ending inventory at December 31 was $360,000. What was the inventory turnover for the year?

Which of the following ratios measures short-term solvency?

Selected information from the 2011 and 2010 financial statements of SCL Corporation is presented below: Refer to the SCL Corporation information above. SCL's current ratio as of December 31, 2011, is

The following 3 ratios have been computed using the financial statements for the year ended December 31, 2011, for James Company: The following additional information has been assembled: Show how the values for the 3 ratios computed above differ if James had used FIFO, depreciated the asset over 8 years, and recognized only 5% of its environmental cleanup obligation. Compute how the financial statements would differ if the alternative accounting methods had been used. Do not treat the use of these alternative methods as accounting changes. Ignore any income tax effects.

Waldo Company is expected to pay a $0.50 per share dividend at the end of the year. The required rate of return on the stock is 15 percent. Required: What is the value per share of the company's stock?