Exam 12: Financial Statement Analysis

Lionworks Inc.'s operating income for the year was $75,000.The interest expense was $11,500 and the income tax expense was $6,500.Lionworks Inc.'s interest coverage ratio for the year is:

Industrial Medical Supply has net sales of $1,200,000,net income of $85,000,average current assets of $53,000,average fixed assets of $184,000,and average total assets of $237,000.Industrial Medical Supply's fixed asset turnover ratio is:

A business's competitive environment describes:

If Island Coffee's net sales decreased from $90,000 in year 1 to $45,000 in year 2 and its cost of goods sold decreased from $30,000 in year 1 to $20,000 in year 2,the vertical analysis based on sales would show the following for cost of goods sold for the two periods (rounded to nearest tenth of a percent):

When does a business pay dividends?

Common-size statements use the same percentages that are computed during a vertical analysis,but no dollar amounts are shown.

Illusions,Inc.has net sales of $980,000,net income of $72,000,average current assets of $42,000,average fixed assets of $168,000,and average total assets of $210,000.Illusions,Inc.'s fixed asset turnover ratio is:

Cox Corporation has a cost of goods sold of $1,600,000.The beginning merchandise inventory was $195,000 and the ending merchandise inventory is $205,000.Cox's inventory turnover ratio is:

Serenity Sounds,Inc.reported the following for 2012: What is the dividend payout ratio for Serenity Sounds,Inc.?

Return on equity measures the relationship between net income and average total assets.

Ironworks,Inc.has a cash balance of $80,000;short-term investments of $20,000;net receivables of $60,000;and inventory of $450,000.Current liabilities total $200,000.Red Line's current ratio is:

Why would a slow inventory turnover rate be a red flag in a financial statement analysis?

The formula for determining the percentage change in an account from one year to the next year is [(amount in later period - amount in earlier period)/ amount in earlier period] times 100.

A(n)________ is a distinguishable part of a business that is subject to a different set of risks and returns than other parts of the business.

Common-size statements are useful when comparing a company's performance against that of a company of a different size.

Financial analysis focuses on evaluating a company's past performance to predict its current performance.

Financial analysis is used to predict the future of a business.

A common-size comparative statement shows:

A high dividend yield means that stockholders are receiving a large return in the form of dividends.

Which of the following would be a red flag in a financial statement analysis?