Exam 13: Financial Analysis: The Big Picture

Horizontal analysis is a technique for evaluating financial statement data

Given the following data for the King Company: Current liabilities \ 400 Long-term debt 480 Common stock 700 Retained earnings 520 Total liabilities \& stockholders' equity \ 2,100 How would common stock appear on a common size balance sheet?

Cochran Corporation, Inc. has the following income statement (in millions): COCHRAN CORPORATION, INC. Income Statement For the Year Ended December 31, 2014 Net Sales \ 240 Cost of Goods Sold 80 Gross Profit 160 Operating Expenses 65 Net Income \ 95 Using vertical analysis, what percentage is assigned to cost of goods sold?

______________ analysis, also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.

Which of the following ratios may be used to measure a company's quality of earnings?

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 15,000 Property, plant and equipment 210,000 Total Assets \ 300,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 90,000 Stockholders' equity-common 150,000 Total Liabilities and Stockholders' Equity \ 300,000 Income Statement Sales revenue \ 121,000 Cost of goods sold 66,000 Gross margin 55,000 Operating expenses \ 30,000 Net income \ 25,000 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 \ 40,000 What is the inventory turnover for this company?

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?

Vertical analysis is a technique for evaluating a series of financial statement data over a period of time to determine the increase (decrease) that has taken place.

An inexperienced accountant for CJS Transport Corporation showed the following in CJS Transport's 2014 income statement: income before income taxes $420,000; Extraordinary loss from tornado (before taxes) $60,000; and net income $132,000. The extraordinary loss and taxable income are both subject to a 30% tax rate. Instructions Prepare a corrected income statement beginning with "Income before income taxes."

Both profit margin and asset turnover affect a company's return on assets.

A common measure of profitability is the

Using the following selected items from the comparative balance sheet of Kato Company, illustrate horizontal and vertical analysis. December 31, 2014 December 31, 2013 Accounts Receivable \ 720,000 \ 630,000 Inventory 450,000 360,000 Total Assets 3,200,000 3,000,000

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) 30,000 Inventory 20,000 Property, plant and equipment 210,000 Total Assets \ 300,000 Liabilities and Stockholders' Equity Current liabilities \ 60,000 Long-term liabilities 90,000 Stockholders' equity-Common 150,000 Total Liabilities and Stockholders' Equity \ 300,000 Income Statement Sales revenue \ 90,000 Cost of goods sold 45,000 Gross margin 45,000 Operating expenses 20,000 Net income \ 25,000 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 accounts receivable turnover for this company?

All of the following are reported on the income statement net of tax except

Companies report most changes in accounting principle currently.

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

Which of the following would be considered an "Other Comprehensive Income" item?

A general rule to use in assessing the average collection period is that it

In a common size income statement, the 100% figure is