Exam 13: Financial Statement Analysis

Discontinued operations and extraordinary items are two components of the income statement that are reported after income from operations or are reported separately because of their unique nature.

Which of the following ratios is least useful in evaluating a company's ability to pay its current debts as they become due?

Ranier Parts Company has a return on assets of 12% and a return on common stockholders' equity of 15%. What causes the difference in the two returns?

The dollar change and percentage change in the accounts receivable account from 2013 to 2014 is calculated for Allison Corporation. This is an example of

Indicate the type of each ratio listed below. -Times interest earned ratio

The number of days' sales in inventory is the same as a company's accounting cycle.

is a line item on the income statement to reflect any gain or loss from an event that is both unusual in nature and infrequent in occurrence.

Which of the following considerations is most important for a stockholder when evaluating whether to purchase stock in a company?

Service-oriented companies have different needs than product-oriented companies when analyzing financial statements. REQUIRED: Why is this true? Give an example of a financial ratio that is meaningless to a service business.

The acid-test ratio is a stricter test of a company's ability to pay its current debts as they are due than the current ratio is.

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply. -Times interest earned ratio

For each ratio listed, select whether an increase or decrease in the ratio is generally considered to be better. -Current ratio

, or an increase in the level of prices, is another important consideration in analyzing financial statements.

Trend analysis is another name for analysis.

You want to know whether selling and administrative expenses were reasonable for the past year, based on the level of sales. The best analysis for obtaining this information is:

Which of the following yields the return on assets ratio?

An example of horizontal analysis is the increase in cost of goods sold by 29% from 2015 to 2016.

Use the following information that was obtained from the 2016 and 2015 financial statements of Lake Company, River Corporation, and Ocean Company to answer the questions that follow. REQUIRED: Compare the three companies and answer the following: A Compute the number of days' sales in inventory for each company for 2016. B Which company appears to have the best liquidity position based solely on the inventory analysis? Explain. C What information is provided to users with your calculations in part A?

What is meant by a company's "long-term financial health"? Which side of the balance sheet is more informative for this issue? Explain.

Which of the following statements is true regarding horizontal analysis?