Exam 15: Financial Statement Analysis

The net income for the year ended was $300,000. The company has no preferred stock. Common stockholders' equity was $1,400,000 at the beginning of the year and $1,600,000 at the end of the year. The return on common stockholders' equity would be:

Pathways Company provides the following historical data: Net sales \ 4,970 \ 4,500 \ 3,980 \ 3,270 \ 4,750 \ 4,400 Using the year 2010 as a base year, provide a trend analysis using the following format: Net sales \ 4,970 \ 4,500 \ 3,980 \ 3,270 \ 4,750 \ 4,400 Percentages

A company reports total assets of $525,000 and stockholders' equity of $395,000. Which of the following is the debt ratio?

If an analyst wishes to compare several different companies that vary in size, which of the following types of financial statement analysis would be used?

Arlington Company has prepared the following common-size income statement to compare its performance with industry averages: Arlington Co. Industry Revenues 100.0\% 100.0\% Cost of goods sold 43.8\% 39.7\% Gross Profit 56.2\% 60.3\% Operating expenses: Sales and marketing expense 18.1\% 21.4\% General and administrative expense 12.0\% 14.2\% Research and development expense 4.1\% 4.0\% Total operating expenses 34.2\% 39.6\% Income before income tax 22.0\% 20.7\% Income tax expense 4.4\% 4.2\% Net income(loss) 17.6\% 16.5\% - Based on the above data, an analyst could conclude that Arlington achieves better results than the industry average by controlling its operating expenses more effectively.

Peartree Company provides the following data: BALANCE SHEET Dec 31,2014 Dec 31,2013 Cash \ 21,000 \ 18,000 Accounts receivable, net 31,000 35,000 Inventory 53,000 25,000 PP\&E, net 120,000 90,000 Total assets \ 225,000 \ 168,000 Additional information: • Net sales (all on account): $240,000 • Cost of goods sold: $110,000 - How much is the accounts receivable turnover for 2014?

The asset turnover rate is a way to evaluate how well a company can pay its short-term liabilities.

If an analyst wishes to see how operating expenses of a company have changed from one year to the next, using a horizontal analysis would be the best approach.

A company has 6,000 shares of common stock outstanding and no preferred stock. The total common stockholders' equity is $1,500,000. The book value per share of common stock is:

Which of the following balance sheet displays shows only percentages?

Quick assets do NOT include inventory.

The times-interest-earned ratio shows a creditor the firm's ability to pay interest on debt.

A common-size statement reports only percentages-no dollar amounts.

The inventory turnover ratio is a measure of the company's ability to pay all of its current liabilities if they come due immediately.

The Arlington Company prepared a common-size income statement to compare its results with its key competitor, Bardo Company. Please refer to the following data: Arlington Co. Bardo Co. Revenues 100.0\% 100.0\% Cost of goods sold 42.1\% 47.8\% Gross Profit 57.9\% 52.2\% Operating expenses: Sales and marketing expense 26.3\% 8.6\% General and administrative expense 12.0\% 10.8\% Research and development expense 4.1\% 10.2\% Total operating expenses 42.4\% 29.6\% Income before income tax 15.5\% 22.6\% Income tax expense 3.3\% 5.8\% Net income(loss) 12.3\% 16.8\% - Based on the above data, an analyst could conclude that Arlington's total net income is higher than the industry average.

When preparing an annual report, the earnings per share amount is generally shown on a company's income statement.

Please refer to the following trend analysis of Pathways Company: 2015 2014 2013 2012 2011 2010 Net sales \ 4,970 \ 4,500 \ 3,980 \ 3,270 \ 4,750 \ 4,400 Percentages 113.0\% 102.3\% 90.5\% 74.3\% 108.0\% 100.0\% - Which of the following is a correct conclusion from the above analysis?

If an analyst wishes to see how sales revenue of a company has changed from one year to the next, which of the following types of financial statement analysis would be used?

Which of the following is the base amount when performing vertical analysis of an income statement?

A company reports net income of $70,000 and net sales of $950,000. Which of the following is the rate of return on net sales?