The following balance sheet information is provided for Gaynor Company: $\begin{array}{l} \begin{array}{|l} \hline \text { Assets}\\ \hline \text { Cash}\\ \hline \text { Accounts receivable}\\ \hline \text { Inventory}\\ \hline \end{array} \begin{array}{r|} \hline 2014 \\ \hline \$ \quad 4,000 \\ \hline 15,000 \\ \hline \$ \quad 35,000\\ \hline \end{array} \begin{array}{r|} \hline 2013 \\ \hline \$ \quad2,000 \\ \hline 12,000 \\ \hline \$ \quad 38,000\\ \hline \end{array} \end{array}$ Assuming Year 2 cost of goods sold is $153,300,what is the company's inventory turnover?

A) 4.0 times B) 4.4 times C) 4.2 times D) None of these answers is correct. A) 4.0 times B) 4.4 times C) 4.2 times D) None of these answers is correct.

The following balance sheet information was provided by Western Company: $\begin{array}{l} \begin{array}{|l} \hline \text { Assets}\\ \hline \text { Cash}\\ \hline \text { Accounts receivable}\\ \hline \text { Inventory}\\ \hline \end{array} \begin{array}{r|} \hline 2014 \\ \hline \$ \quad 4,000 \\ \hline 15,000 \\ \hline \$ \quad 35,000\\ \hline \end{array} \begin{array}{r|} \hline 2013 \\ \hline \$ \quad2,000 \\ \hline 12,000 \\ \hline \$ \quad 38,000\\ \hline \end{array} \end{array}$ Assuming Year 2 net credit sales totaled $270,000,what was the company's average days to collect receivables? (Use 365 days in a year.Do not round your intermediate calculations. )

A) 18.25 days B) 47.31 days C) 16.22 days D) 20.28 days A) 18.25 days B) 47.31 days C) 16.22 days D) 20.28 days

The following information applies to Markham Company: $\begin{array}{|l|r|} \hline \text { Assets } \\ \hline \text { Cash }& \$ \quad 6,000 \\ \hline \text { Accounts receivable } & 13,000 \\ \hline \text { Inventory } & 16,000 \\ \hline \text { Plant and equipment, net } & 21,000 \\ \hline \text { Land } & \underline { 19,000} \\ \hline \text { Total assets }& \underline { \$ \quad 75,000 }\\ \hline \\ \hline \text { Liabilities and stockholders' equity }\\ \hline \text { Accounts payable }& \$ \quad5,000\\ \hline \text { Salaries payable } & 10,000 \\ \hline \text { Bonds payable (due 2020) } & 12,000 \\ \hline \text { Capital stock, no par } & 23,000 \\ \hline \text { Retained earnings } & \underline { 25,000} \\ \hline \text { Total liabilities and stockholders' equity }& \underline { \$ \quad 75,000 }\\ \hline \end{array}$ Additional information: Net credit sales equal $220,000 and beginning accounts receivable were $11,000. Required: Compute Markham's: (a)Quick ratio (b)Current ratio (c)Working capital (d)Accounts receivable turnover (e)Average days to collect receivables Round your answers to two decimal places.

(a)Quick ratio = ($6,000 + $13,000)÷ ($5

Exam 13: Financial Statement Analysis

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

(Multiple Choice)

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Question 61

Earnings before interest and taxes divided by interest expense is the formula for which of these analytical measures?

(Multiple Choice)

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Question 62

Rialto Company collected $5,000 on account.What impact will this transaction have on the firm's current ratio?

(Multiple Choice)

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Question 63

All of the following are considered to be measures of a company's short-term debt-paying ability except:

(Multiple Choice)

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Question 64

Which of the following statements about financial statements is incorrect?

(Multiple Choice)

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Question 65

Explain the difference between horizontal analysis and vertical analysis of a company's financial statements.

(Essay)

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Question 66

The following balance sheet information is provided for Gaynor Company: Assets Cash Accounts receivable Inventory 2014 \ 4,000 15,000 \ 35,000 2013 \ 2,000 12,000 \ 38,000 Assuming Year 2 cost of goods sold is $153,300,what is the company's inventory turnover?

(Multiple Choice)

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Question 67

The following balance sheet information was provided by Western Company: Assets Cash Accounts receivable Inventory 2014 \ 4,000 15,000 \ 35,000 2013 \ 2,000 12,000 \ 38,000 Assuming Year 2 net credit sales totaled $270,000,what was the company's average days to collect receivables? (Use 365 days in a year.Do not round your intermediate calculations. )

(Multiple Choice)

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Question 68

Which of the following is a potential limitation of financial statement analysis?

(Multiple Choice)

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Question 69

Montana Company reported the following operating results for Year 1 and Year 2: 2013 Amount \% of Sales Sales Cost of goods sold Gross margin 360,000 Operating expenses Income before taxes 135,000 Income taxes Net income

(Essay)

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Question 70

Indicate whether each of the following statements about financial statement analysis is

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Question 71

Gamma Company and Chi Company are similar and similar-sized companies operating in the same industry.At the end of the most recent year,Gamma's price-earnings ratio was 22.0,and Chi's price-earnings ratio was 14.2.What conclusion would you draw based on the difference in price-earnings ratios for the two companies?

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Question 72

Perhaps D should read: Current assets increase as D is correct as written. Done.JMF If the company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank,then immediately after this transaction what is the expected impact on the components of the current ratio?

(Multiple Choice)

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Question 73

The following information applies to Markham Company: Assets Cash \ 6,000 Accounts receivable 13,000 Inventory 16,000 Plant and equipment, net 21,000 Land Total assets Liabilities and stockholders' equity Accounts payable \ 5,000 Salaries payable 10,000 Bonds payable (due 2020) 12,000 Capital stock, no par 23,000 Retained earnings Total liabilities and stockholders' equity Additional information: Net credit sales equal $220,000 and beginning accounts receivable were $11,000. Required: Compute Markham's: (a)Quick ratio (b)Current ratio (c)Working capital (d)Accounts receivable turnover (e)Average days to collect receivables Round your answers to two decimal places.

(Essay)

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Question 74

The Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

(Multiple Choice)

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Question 75

Longwood Company had a current ratio of 3:1 at the end of Year 1.The asset section of the company's balance sheet is provided below: Cash \ 100,000 Accounts receivable \ 400,000 Less allowance for uncollectible Accounts 350,000 Inventory 550,000 Prepaid expenses 74,000 Property, plant, \& equipment, net Total assets Required: 1)Compute Longwood Company's end-of-year working capital. 2)Compute the company's quick (acid-test)ratio. 3)The company has a debt agreement with its bank that authorizes the bank to call in its loan to the company if the company's current ratio falls below 3:1 as of the last day of any month during the term of the loan.During January Year 2,the company engaged in the three following transactions: (a)Collected $100,000 on account; (b)Purchased inventory on account,$50,000 (c)Paid accounts payable,$60,000 Will the company be in default after completing these transactions? Justify your answer. Round your answers to two decimal places.

(Essay)

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Question 76

Cost of goods sold divided by average inventory is the formula for which of these analytical measures?

(Multiple Choice)

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Question 77

Benson Company received cash of $1,000,000 from issuing common stock at par value.As a result of this transaction,the company's debt to equity ratio will:

(Multiple Choice)

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Question 78

In vertical analysis,each item is expressed as a percentage of:

(Multiple Choice)

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Question 79

Financial statement analysis involves forms of comparison including:

(Multiple Choice)

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Question 80

You are considering an investment in IBM stock and wish to assess the firm's long-term debt-paying ability and its use of debt financing.All of the following ratios can be used to assess solvency except:

Earnings before interest and taxes divided by interest expense is the formula for which of these analytical measures?

Rialto Company collected $5,000 on account.What impact will this transaction have on the firm's current ratio?

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Which of the following statements about financial statements is incorrect?

Explain the difference between horizontal analysis and vertical analysis of a company's financial statements.

The following balance sheet information is provided for Gaynor Company: Assets Cash Accounts receivable Inventory 2014 \ 4,000 15,000 \ 35,000 2013 \ 2,000 12,000 \ 38,000 Assuming Year 2 cost of goods sold is $153,300,what is the company's inventory turnover?

Which of the following is a potential limitation of financial statement analysis?

Montana Company reported the following operating results for Year 1 and Year 2: 2013 Amount \% of Sales Sales Cost of goods sold Gross margin 360,000 Operating expenses Income before taxes 135,000 Income taxes Net income

Indicate whether each of the following statements about financial statement analysis is

The Crestar Company reported net income of $112,000 on 20,000 average outstanding common shares.Preferred dividends total $12,000.On the most recent trading day,the preferred shares sold at $50 and the common shares sold at $95.What is this company's current price-earnings ratio?

Cost of goods sold divided by average inventory is the formula for which of these analytical measures?

Benson Company received cash of $1,000,000 from issuing common stock at par value.As a result of this transaction,the company's debt to equity ratio will:

In vertical analysis,each item is expressed as a percentage of:

Financial statement analysis involves forms of comparison including:

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Statement of Cash Flows

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