Exam 3: Financial Statements and Ratio Analysis

The two categories of ratios that should be utilized to assess a firm's true liquidity are the ________.

Gross profit is ________.

The common stock entry in balance sheet is the par value of common stock.

Both current and prospective shareholders are interested in the firm's current and future level of risk and return, which directly affect share price.

The DuPont system allows a firm to break its return on equity into a profit-on-sales component, an efficiency-of-asset-use component, and a use-of-operating leverage component.

Net profit margin measures the percentage of each sales dollar remaining after all costs and expenses, including interest, taxes, and common stock dividends, have been deducted.

Time-series analysis is often used to ________.

If the only information you are given about Ryan Corporation, a large public company in business for many years, is that it has a current ratio of 2.9, what could you infer from this?

Earnings per share represents amount earned during the period on each outstanding share of common stock.

The basic inputs to an effective financial analysis are the firm's income statement and the balance sheet.

An analyst should be careful when conducting ratio analysis to ensure that ________.

Sunshine Corporation had a retained earnings balance of $850,000 at the beginning of 2015. By the end of 2015, the company's retained earnings balance stood at $950,000. During 2015, the company earned $245,000 as net profits after paying its taxes. The company was then able to pay its preferred stockholders a sum of $45,000. Compute the common stock dividend per share in 2015 assuming 10,000 shares of common stock outstanding.

The less fixed-cost debt (financial leverage) a firm uses, the greater will be its risk and return.

A firm with sales of $1,000,000, net profits after taxes of $30,000, total assets of $1,500,000, and common stockholders' investment of $750,000 has a return on equity of ________.

Table 3.2 Dana Dairy Products Key Ratios Income Statement Dana Dairy Products For the Year Ended December 31, 2013 Balance Sheet Dana Dairy Products December 31, 2013 -Since 2012, the liquidity of Dana Dairy Products ________. (See Table 3.2)

Profitability ratios capture both risk and return.

A firm has the following accounts and financial data for 2014: The firm's earnings per share for 2014 is ________.

Generally accepted accounting principles are authorized by the Financial Accounting Standards Board (FASB).

A firm's year-end retained earnings balance are $670,000 and $560,000 for 2014 and 2015, respectively. The firm reported net profits after taxes of $100,000 in 2015. The firm paid dividends of ________ in 2015.

Present and prospective shareholders are mainly concerned with a firm's ________.