Exam 18: Financial Analysis: the Big Picture

The following items were taken from the financial statements of Ritz, Inc., over a four-year period: Instructions Using horizontal analysis and 2009 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

Selected data from Oates Company are presented below: Instructions Calculate the profitability ratios that can be computed from the above information.

Which one of the following is not a tool in financial statement analysis?

Vertical analysis is also known as

Comparative balance sheets are usually prepared for

The receivables turnover is calculated by dividing _________________ by average ___________________.

Earnings per share is calculated

The discontinued operations section of the income statement refers to

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

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

Ratios that measure the short-term ability of the company to pay its maturing obligations are

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

Times interest earned is also called the

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

Pro forma income usually excludes items that the company thinks are unusual or nonrecurring.

In performing a vertical analysis, the base for prepaid expenses is

Ester's Bunny Barn has experienced a $60,000 loss due to tornado damage to its inventory. Tornados have never before occurred in this area. Assuming that the company's tax rate is 30%, what amount will be reported for this loss on the income statement?

Flynn Corporation had net income of $2,000,000 in 2009. Using 2009 as the base year, net income decreased by 70% in 2010 and increased by 175% in 2011. Instructions Compute the net income reported by Flynn Corporation for 2010 and 2011.

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 price-earnings ratio for Soho?