Exam 13: Financial Analysis: The Big Picture

Horizontal analysis (trend analysis) percentages for Omega Company's sales, cost of goods sold, and expenses are listed here. Horizontal Analysis 2015 2014 2013 Sales revenue 98.2\% 104.8\% 100.0\% Cost of goods sold 103.1 97.5 100.0 Expenses 108.6 96.4 100.0 Instructions Explain whether Omega's net income increased, decreased, or remained unchanged over the 3-year period.

In a common size income statement, net sales are represented by 100%.

Identify and explain factors that affect quality of earnings.

The accounts receivable turnover and inventory turnover are used to analyze

Hobson Corporation had net sales for the year of $300,000 and average total assets of $200,000. The asset turnover is ____________ times.

A supplier to a company would be most interested in the

In analyzing financial statements, horizontal analysis is a

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $7,310,000. The average collection period of the receivables in terms of days was

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

Return on common stockholders' equity is most closely related to

If Year 1 equals $700, Year 2 equals $810, and Year 3 equals $650, the percentage to be assigned for Year 1 in a trend analysis, assuming that Year 1 is the base year, is

Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year. The average inventory for the year amounted to $2,500,000. The average days in inventory during the year was approximately

In a common size financial statement, which of the following is given a percentage of 100 percent?

Lupton Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $160,000 loss in the year of disposal. The loss on disposal of the segment was $80,000. If the tax rate is 30%, and income before income taxes was $1,300,000,

In horizontal analysis, each item is expressed as a percentage of the

The return on 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.

Expressing each item in a financial statement as a percent of a base amount is called ______________ analysis.

Corsig Corporation had the following comparative current assets and current liabilities: Dec. 31,2014 Dec. 31,2013 Current assets Cash \ 25,000 \ 30,000 Debt investments 40,000 10,000 Accounts receivable 60,000 90,000 Inventory 110,000 90,000 Prepaid expenses 35,000 25,000 Total current assets \ 270,000 \ 245,000 Current liabilities Accounts payable \ 120,000 \ 110,000 Salaries and wages payable 40,000 30,000 Income tax payable 10,000 15,000 Total current liabilities \ 170,000 \ 155,000 During 2014, net credit sales and cost of goods sold were $570,000 and $350,000, respectively. Net cash provided by operating activities for 2014 was $140,000. Instructions Compute the following liquidity measures for 2014: 1. Current ratio 2. Current cash debt coverage 3. Accounts receivable turnover 4. Inventory turnover

In horizontal analysis, the base year is the most current year being examined.

Because pro forma earnings are based on specific rules, these amounts are highly reliable.