Exam 13: Financial Statement Analysis

Show the effect of each of the transactions below on total liabilities and the debt-to-equity ratio by using one of the following symbols in each box to complete the table. If the numerator and denominator of a ratio both increase or both decrease by the same amount, the effect of the event on the ratio is "insufficient data."

Which of the following is true concerning discontinued operations?

Most companies

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

The following information was obtained from the comparative financial statements included in Arco Inc.'s 2016 annual report. All amounts are in millions of dollars. 1. Using the information provided, compute the following for 2016 and 2015: a. Debt-to-equity ratio at each year-end b. Times interest earned ratio c. Debt service coverage ratio d. Cash flow from operations to capital expenditures ratio 2. Comment briefly on the company's solvency.

Presented below are selected data from the financial statements of Hospital Supply Company for 2016, 2015, and 2014. A Calculate Hospital Supply's number of days' sales in receivables for 2016 and 2015. Assume 360 days in a year. B What is the meaning of your answer in part A?

Refer to the financial statements of Culinary Delights Company. REQUIRED: A Calculate Culinary Delights' return on sales ratio for 2016 and 2015. Assume that the income tax rate is 30%. What information is provided with this ratio? B Calculate the return on common stockholders' equity ratio for 2016 and 2015. Stockholders' equity at December 31, 2014, was $897,431 in thousands. Why is the denominator an average instead of a single amount?

Which of the following items need not be reported separately at the bottom of the income statement?

In the numerator of the debt service coverage ratio, is a good substitute for cash flow from operations before interest and tax payments, especially where changes in these accounts are insignificant.

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

The analysis of common-size statements is called horizontal analysis.

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

If a company must pay more for the amounts provided by creditors and preferred stockholders than it can earn overall, as indicated by the return on assets, there will be favorable leverage.

What do profitability ratios measure? Explain.

Which of the following is the most serious limitation to financial statement analysis of publicly traded companies?

The cash-to-cash operating cycle is the number of days' sales in

In considering equity and debt financing, which of the following statements is true?

Income statements for Maltese Corp. for the past two years are as follows: REQUIRED: 1. Prepare common-size comparative income statements for the two years for Maltese Corp. 2. What observations can you make about the common-size statements? List at least four observations. 3. Prepare comparative income statements for Maltese Corp., including columns for the dollars and for the percentage increase or decrease in each item on the statement. 4. Assume that you are interested in identifying reasons for the changes in selling and administrative expenses and income tax expense. Explain where you would look to find additional information about the change.

Some ratios are more useful for management, whereas others are better suited to the needs of outsiders, such as stockholders and bankers. What is an example of a ratio that is primarily suited to management use and why? What ratio is more suited to use by outsiders and why?

Presented below are selected data from the financial statements of Medtech Company for 2016, 2015, and 2014. A Calculate Medtech's accounts receivable turnover ratio for 2016 and 2015. B What could have caused the change? Explain.