Exam 14: Financial Statement Analysis

Turnbull Department Store had net credit sales of $18,000,000 and cost of goods sold of $15,000,000 for the year. The average inventory for the year amounted to $2,500,000. Inventory turnover for the year is

Intracompany comparisons of the same financial statement items can often detect changes in financial relationships and significant trends.

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

Blitzen Corporation had net income of $500,000 and paid dividends to common stockholders of $40,000 in 2020. The weighted average number of shares outstanding in 2020 was 60,000 shares. Blitzen Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Blitzen Corporation's payout ratio for 2020 is

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

A ratio calculated in the analysis of financial statements

When the disposal of a significant component occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.

Other comprehensive income includes all changes in stockholder's equity during a period including those changes resulting from investments by stockholders.

Net sales are $8,000,000, beginning total assets are $2,500,000, and the asset turnover is 4.0 times. What is the ending total asset balance?

The following financial statement information is available for James Corporation: 2020 2019 Net sales \ 780,000 \ 697,000 Cost of goods sold 406,000 377,000 Net income 120,000 80,000 Tax expense 48,000 29,000 Interest expense 14,000 14,000 The profit margin for 2020 is

Horizontal analysis is appropriately performed

The current ratio is a measure of all the ratios calculated for the current year.

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the cost of goods sold as a percentage of sales must be 90%.

Vertical and horizontal analyses are concerned with the format used to prepare financial statements.

The following information is available for Oakland Company: 2020 2019 Accounts receivable \ 360,000 \ 400,000 Inventory 340,000 400,000 Net credit sales 2,470,000 1,400,000 Cost of goods sold 1,850,000 1,060,000 Net income 300,000 170,000 The inventory turnover ratio for 2020 is

The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

Stellar, Inc. decided on January 1 to discontinue its telescope manufacturing division. On July 1, the division's assets with a book value of $840,000 are sold for $600,000. Operating income from January 1 to June 30 for the division amounted to $130,000. Ignoring income taxes, what total amount should be reported on Stellar's income statement for the current year under the caption, Discontinued Operations?

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

Carter Corporation reported net sales of $250,000, $400,000, and $600,000 in the years 2018, 2019, and 2020 respectively. If 2018 is the base year, what is the trend percentage for 2020?

Vertical analysis is a technique which expresses each item within a financial statement