Exam 12: Financial Analysis: The Big Picture

Horizontal analysis is also known as

Cochran Corporation, Inc. has the following income statement (in millions): COCHRAN CORPORATION, INC. Income Statement For the Year Ended December 31, 2017 Net Sales \ 240 Cost of Goods Sold 150 Gross Profit 90 Operating Expenses \ 65 Net Income \ 25 Using vertical analysis, what percentage is assigned to net income?

Inventory turnover measures the number of times on average the inventory was sold during the period.

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

If Year 1 equals $780, Year 2 equals $819, and Year 3 equals $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

A high accounts receivable turnover indicates

The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments \ 40,000 Accounts receivable (net) 25,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets \ 295,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 85,000 Stockholders' equity-Common 150,000 Total Liabilities and Stockholders' Equity \ 295,000 Income Statement Sales revenue \ 85,000 Cost of goods sold 45,000 Gross margin 40,000 Operating expenses 20,000 Net income \ 20,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock 0.90 Cash provided by operations \ 30,000 What is the inventory turnover for this company?

In horizontal analysis, the base year is the most current year being examined.

Comparisons of company data with industry averages provide information about a company's relative position within the industry.

Net sales are $2,700,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

Analysts are interested in sustainable income, which is equal to the past year's net income.

Another name for horizontal analysis is trend analysis.

A solvency ratio measures the income or operating success of a company for a given period of time.

All of the following statements are true regarding comprehensive income except

If Year 1 equals $700, Year 2 equals $840, and Year 3 equals $630, the percentage to be assigned for Year 1 in a trend analysis, assuming that Year 1 is the base year, is

Tito Corporation had net income of $2,000,000 and paid dividends to common stockholders of $300,000 in 2017. The weighted average number of shares outstanding in 2017 was 400,000 shares. Tito Corporation's common stock is selling for $50 per share on the NASDAQ. Tito Corporation's price-earnings ratio is

In a common size balance sheet, the 100 percent figure is

The asset turnover measures

The following information pertains to Blue Flower Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Cash and short-term investments \ 45,000 Accounts receivable (net) 30,000 Inventory 25,000 Property, plant and equipment 210,000 Total Assets \ 310,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 95,000 Stockholders' equity-common 155,000 Total Liabilities and Stockholders' Equity \ 310,000 Income Statement Sales revenue \ 116,000 Cost of goods sold 66,000 Gross margin 50,000 Operating expenses \ 30,000 Net income \ 20,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share on common stock .50 Cash provided by operations \ 35,000 What is the return on assets for this company?

Horizontal, vertical, and circular analyses are the basic tools of financial statement analysis.