Exam 18: Financial Analysis: the Big Picture

Baden Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $75,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on the amount of Baden Company's working capital?

Gumble Corporation had income from continuing operations of $300,000 for the year ended December 31, 2010. It also had the following items (before income taxes): 1. Extraordinary flood loss of $120,000. 2. Loss of $50,000 on discontinuance of a division. All items are subject to income taxes at a 30% tax rate. Instructions Prepare a partial income statement, beginning with income from continuing operations.

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

Net income does not appear in the numerator of the

If equal amounts are added to the numerator and the denominator of the current ratio, the ratio will always

Each of the following is an extraordinary item except the

The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for Soho?

A percentage change can be computed only if the base amount is zero or positive.

In performing a vertical analysis, the base for cost of goods sold is

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

The two criteria necessary for an item to be classified as an extraordinary item are that the transaction or event must be (1) __________________ and (2) ___________________.

The following information pertains to Soho Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on common stockholders' equity for Soho?

The following information pertains to Cashe Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on common stockholders' equity for Cache?

Using the following operating data for Steiner Corporation, prepare a schedule showing a vertical analysis for 2010.

The debt to total assets ratio

Walker Clothing Store had a balance in the Accounts Receivable account of $390,000 at the beginning of the year and a balance of $410,000 at the end of the year. Net credit sales during the year amounted to $2,000,000. The average collection period of the receivables in terms of days was

All of the following statements regarding changes in accounting principles are true except:

Another name for trend analysis is horizontal analysis.

Winfrey Corporation gathered the following information for the fiscal year ended December 31, 2010: Winfrey Corporation is subject to a 30% income tax rate. Instructions Prepare a partial income statement, beginning with income before income taxes.

Which one of the following is primarily interested in the liquidity of a company?