Exam 18: Financial Statement Analysis

A weakness of the current ratio is

Which one of the following would not be considered a liquidity ratio?

Saira Inc. has the following income statement (in millions): SAIRA, INC Income Statement For the Year Ended December 31,2017 Net Sales \ 300 Cost of Goods Sold 180 Gross Profit 120 Operating Expenses 45 Net Income \ 75 Using vertical analysis what percentage is assigned to Cost of Goods Sold?

State the effect of the following transactions on the current ratio. Use increase decrease or no effect for your answer. (a) Collection of an accounts receivable. (b) Declaration of cash dividends. (c) Additional stock is sold for cash. (d) Short-term investments are purchased for cash. (e) Equipment is purchased for cash. (f) Inventory purchases are made for cash. (g) Accounts payable are paid.

______________ analysis also called trend analysis is a technique for evaluating a percentage increase or decrease for a financial statement item over a period of time.

Turnbull Department Store had net credit sales of $18000000 and cost of goods sold of $15000000 for the year. The average inventory for the year amounted to $2500000. The average number of days in inventory during the year was

The following information pertains to Ortiz 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) 25,000 Inventory 20,000 Property, plant and equipment 270,000 Total Assets \ 360,000 Liabilities and Stockholders' Equity Current liabilities \ 50,000 Long-term liabilities 90,000 Stockholders' equity—common 220,000 Total Liabilities and Stockholders' Equity \ 360,000 Income Statement Sales \ 150,000 Cost of goods sold 66,000 Gross profit 84,000 Operating expenses 29,000 Net income 55,000 Number of shares of common stock 6,000 Market price of common stock \ 20 Dividends per share 50 What is the return on common stockholders' equity for Ortiz?

Horizontal vertical and circular analyses are the most common tools of financial statement analysis.

Turnbull Department Store had net credit sales of $18000000 and cost of goods sold of $15000000 for the year. The average inventory for the year amounted to $2500000. Inventory turnover for the year is

If inventory turnover is 8 times and the average inventory was $400000 the cost of goods sold during the year was $______________ and the days in inventory was ______________ days.

The comparative condensed income statements of Marks Corporation are shown below. MARKS CORPORATION Comparative Condensed Income Statements For the Years Ended December 31 2017 2016 Net sales \ 620,000 \ 500,000 Cost of goods sold 450,000 400,000 Gross profit 170,000 100,000 Operating expenses 54,000 40,000 Net income \ 116,000 \ 60,000 Instructions (a) Prepare a horizontal analysis of the income statement data for Marks Corporation using 2016 as a base. (Show the amounts of increase or decrease.) (b) Prepare a vertical analysis of the income statement data for Marks Corporation in columnar form for both years.

__________________ is the most likely level of income to be obtained by a company in the future.

If a company has an acid-test ratio of 1.2:1 what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? Short-term Borrowing Collection of Receivable A) Increase No effect B) Increase Increase C) Decrease No effect D) Decrease Decrease

Comparisons of data within a company are an example of the following comparative basis:

Horizontal analysis is appropriately performed

Carter Corporation reported net sales of $250000 $400000 and $600000 in the years 2015 2016 and 2017 respectively. If 2015 is the base year what is the trend percentage for 2017?

Comparative balance sheets are usually prepared for

The ratios used in evaluating a company's liquidity and short-term debt paying ability that complement each other are the ______________ ratio and the ______________ ratio.

In the vertical analysis of the income statement each item is generally stated as a percentage of net income.

Vertical analysis is also known as