Exam 17: Financial Statement Analysis

An increase in the debt to total assets ratio indicates that the company is

Ratios are used as tools in financial analysis

The following items were taken from the financial statements of Smalley, Inc., over a five-year period: Instructions Using horizontal analysis and 2010 as the base year, calculate the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favourable or unfavourable for each item.

A vertical analysis can compare companies of differing sizes.

When horizontal analysis is used to measure the percentage change between any two periods of time, this is known as

A limitation in calculating ratios in financial statement analysis is that

Liquidity ratios measure

Debt to Total Assets is a ratio which measures a company's solvency.

The price-earnings ratio measures

Voice Brand Security Corporation had $250,000 of current assets and $90,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Voice Brand Security's current ratio?

Pine Hardware Store had net credit sales of $3,900,000 and cost of goods sold of $3,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $700,000, respectively. The receivables turnover ratio was

Although depreciation expense and the carrying amount of property, plant and equipment may be different in one or more periods because of the choice of depreciation methods, in total, over the life of the assets, there is no difference. This is called

If a company has a current ratio of 1.2:1, what respective effects will the borrowing of cash by short-term debt and collection of accounts receivable have on the ratio? Short-term Borrowing Collection of Receivables a. Increase No effect b. Increase Increase c. Decrease No effect d. Decrease Decrease

The following data are taken from the financial statements of Duffy Limited: 2014 2013 Monthly average accounts receivable \ 520,000 \ 550,000 Net sales on account 5,980,000 4,950,000 Terms for all sales are n/30 Instructions a. Calculate the receivables turnover and the collection period for both years. b. What conclusion can an analyst draw about the management of the accounts receivable?

The ratio that uses the weighted average number of common shares in the denominator is the

In performing a vertical analysis for a merchandising company, the base for sales returns and allowances is

From a lender's point of view, a high ratio of debt to total assets is desirable.

An aircraft company would most likely have

A higher price-earnings ratio generally means that