Exam 9: Financial Statement Analysis

Current financial reporting standards assume that users of accounting information:

Alpha Company provided the following balance sheet for Year 2: Assets Cash \ 5,400 Accounts receivable 15,500 Inventory 18,000 Prepaid expenses 1,600 Plant and equipment, net of depreciation 25,000 Land Total assets Liabilities and Stockholders' Equity Accounts payable \ 4,500 Salaries payable 11,500 Bonds payable (Due in ten years) 10,000 Common stock, no par 30,000 Retained earnings Total liabilities and stockholders' equity \ 85,450 What is the company's plant assets to long-term liabilities ratio?

Which ratio measures the percentage of a company's assets that are financed by debt?

Benson Company declared and paid a cash dividend totaling $500,000 on its common stock. As a result of this transaction, the company's debt to assets ratio will:

On December 31, Year 1, Houston Company's total current assets were $560,000 and its total current liabilities were $420,000. On January 1, Year 2, Houston issued a long-term note to a bank for $30,000 cash. Required:Compute Houston's working capital before and after issuing the note payable.Compute Houston's current ratio before and after issuing the note payable. (Round your answer to two decimal places.)

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $29,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. - On January 1, Year 2, Gant purchased merchandise on account for $4,000. Which of the following statements is correct?

The following balance sheet information is provided for Patton Company: Assets Year 2 Year 1 Cash \ 3,300 \ 2,900 Accounts receivable \ 12,800 \ 14,800 Inventory \ 29,500 \ 36,500 Assuming Year 2 cost of goods sold is $373,000, what is the company's average days to sell inventory? (Use 365 days in a year. Do not round your intermediate calculations.)

Milton Company has total current assets of $63,000, including inventory of $19,000, and current liabilities of $39,000. The company's current ratio is:

The following balance sheet information is provided for Apex Company for Year 2: Assets Cash \ 4,000 Accounts receivable 10,150 Inventory 14,000 Prepaid expenses 800 Plant and equipment, net of depreciation 18,700 Land 12,600 rotal assets \ 60,250 Liabilities and stockholders' equity Accounts payable \ 2,310 Salaries payable 9,030 Bonds payable (due in ten years) 8,000 Common stock, no par 20,910 Retained earnings 20,000 Total liabilities and stockholders' equity \6 0,250 What is the company's working capital?

Indicate whether each of the following statements about financial statement analysis is true or false. Working capital is a measure of the amount of current assets a company would have left after paying its current liabilities. ______ If a transaction caused a company's working capital to increase, the transaction caused the company to become less liquid. ______ Interpretation of a company's current ratio can be difficult because it is an absolute amount. ______ The quick ratio is a more conservative variation of the current ratio. ______ The quick ratio is usually calculated by using the following equation: cash + receivables + current marketable securities ÷ current liabilities. ______

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. - On January 1, Year 2, Gant sold inventory on account for $6,000. Which of the following statements is incorrect?

The Bernard Company provided the following information from its financial records: Net income \ 250,000 Total stockholders equity \1 ,000,000 Common dividends \ 15,000 Common shares outstanding, 150,000 12/31 Preferred rights \ 175,000 What is the company's book value per share?

Indicate whether each of the following statements about financial statement analysis is true or false. The ratio of plant assets to long-term liabilities is a measure of a company's ability to obtain additional long-term financing. ______ Generally, a company's current assets should be purchased using long-term financing such as bonds payable. ______ Ratios that measure a company's profitability provide some measure of the effectiveness of the company's management. ______ Net margin indicates the amount remaining from each sales dollar after cost of goods sold has been subtracted out. ______ Net margin is also sometimes called the return on assets ratio. ______

The Bernard Company provided the following information from its financial records: Net income \ 290,000 Total stockholders equity \ 890,000 Common dividends \ 19,000 Common shares outstanding, 129,000 12/31 Preferred rights \ 240,000 What is the company's book value per share?

The study of an individual financial statement item over several accounting periods is called:

Which of the following is an (are) objective(s) of ratio analysis?

The following balance sheet information is provided for Apex Company for Year 2: Assets Cash \ 5,400 Accounts receivable 15,500 Inventory 18,000 Prepaid expenses 1,600 Plant and equipment, net of depreciation 20,200 Land Total assets Liabilities and Stockholders' Equity Accounts payable \ 4,500 Salaries payable 11,500 Bonds payable (Due in ten years) 19,000 Common stock, no par 30,000 Retained earnings Total liabilities and stockholders' equity \ 80,650 What is the company's working capital?

The following balance sheet information is provided for Duke Company for Year 2: Assets Cash \ 5,600 Accounts receivable 11,750 Inventory 14,800 Prepaid expenses 1,600 Plant and equipment, net of depreciation 19,500 Land Total assets Liabilities and Stockholders' Equity Accounts payable \2 ,790 Salaries payable 8,230 Bonds payable (Due in ten years) 12,000 Common stock, no par 16,500 Retained earnings Total liabilities and stockholders' equity \6 6,650 What is the company's current ratio? (Round your answer to 2 decimal places.)

The following balance sheet information is provided for Santana Company for Year 2: Assets Cash \ 6,000 Accounts receivable 12,150 Inventory 15,000 Prepaid expenses 1,800 Plant and equipment, net of depreciation 19,700 Land Total assets Liabilities and Stockholders' Equity Accounts payable \ 2,910 Salaries payable 8,030 Bonds payable (Due in ten years) 13,000 Common stock, no par 15,500 Retained earnings Total liabilities and stockholders' equity \ 78,250 What is the company's debt to equity ratio?