Exam 15: Financial Statement Analysis

Partridge Company provides the following information for the year 2014: Earnings per share \ 0.24/ share Market price of common stock: \ 12.00/ share Dividends paid: \ 0.80/ share (No preferred stock issued) How much was the dividend payout for one share of common stock?

Which of the following is the definition of vertical analysis?

Please refer to the partial balance sheet data provided below: (Dollar amounts in millions) 2014 2013 Amount \% of Total Amount \% of Total Liabilities Current assets: Accounts payable \ 8,500 3.1\% \ 7,300 2.9\% Other current liabilities 1,400 0.5\% 3,900 1.6\% Total current liabilities 9,900 3.6\% 11,200 4.5\% Long-term notes payable 54,000 19.7\% 30,000 12.0\% Total liabilities \ 63,900 23.4\% \ 41,200 16.5\% Stockholders' Equity Common stock \ 12,000 4.4\% \ 12,000 4.8\% Paid-in capital in excess of par 149,000 54.5\% 149,000 59.6\% Retained earnings 48,700 17.8\% 47,900 19.2\% Total stockholders' equity \ 209,700 76.6\% \ 208,900 83.5\% Total liabilities and stockholders' equity \ 273,600 100.0\% \ 250,100 100.0\% -Which of the following would be a valid conclusion from the above data?

The Arlington Company wishes to compare its performance with industry averages. Please refer to the data below: Arlington Co. Industry Revenues \ 8,000 \ 98,000 Cost of goods sold \ 3,500 \ 38,900 Gross Profit \ 4,500 \ 59,100 Operating expenses: Operating expenses: \ 1,450 \2 1,000 Sales and marketing expense \ 960 \1 3,900 General and administrative expense \ 330 \ 3,880 Research and development expense \ 2,740 \ 38,780 Total operating expenses Income before income tax \ 1,760 \ 20,320 Income tax expense \ 350 \4 ,100 Net income(loss) \ 1,410 \ 16,100 Please prepare common-sized income statement using the format below. (Round all amounts to the nearest tenth of a percent.) Arlington Co. Bardo Co. Revenues Cost of revenues Gross Profit Operating expenses: Sales and marketing expense General and administrative expense Research and development expense Total operating expenses Income before income tax Income tax expense Net income(loss)

Which of the following ratios is used to determine how quickly and easily a company is able to sell its inventory?

Perform a horizontal analysis of the following company's balance sheet. Include both the amount and the percentage of change for each account. Account Change Amount Change Percent Current assets \ 121,000 \ 100,000 Accounts receivable 117,000 125,000 Merchandise inventory 70,000 85,000 Current liabilities 63,500 50,000 Long-term liabilities 100,000 100,000 Common stock 50,000 50,000 Retained earnings 94,500 110,000

Please refer to the partial balance sheet data provided below: (Dollar amounts in millions) 2014 2013 Amount \% of Total Amount \% of Total Liabilities Current assets: Accounts payable \ 8,500 3.1\% \ 7,300 2.9\% Other current liabilities 1,400 0.5\% 3,900 1.6\% Total current liabilities 9,900 3.6\% 11,200 4.5\% Long-term notes payable 54,000 19.7\% 30,000 12.0\% Total liabilities \ 63,900 23.4\% \ 41,200 16.5\% Stockholders' Equity Common stock \ 12,000 4.4\% \ 12,000 4.8\% Paid-in capital in excess of par 149,000 54.5\% 149,000 59.6\% Retained earnings 48,700 17.8\% 47,900 19.2\% Total stockholders' equity \ 209,700 76.6\% \ 208,900 83.5\% Total liabilities and stockholders' equity \ 273,600 100.0\% \ 250,100 100.0\% - Which of the following accurately describes the 3.6% figure shown for total current liabilities in 2014?

The times-interest-earned ratio measures the number of times that operating income can pay interest expense.

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\% Which of the following statements can be correctly concluded from the above data?

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 inventory turnover for 2014?

The price/earnings ratio is used for which kind of evaluation?

Please refer to the following data: (Dollar amounts in millions) 2014 2013 Amount \% of Total Amount \% of Total Revenues \ 6,355 100.0\% \ 4,920 100.0\% Cost of revenues 3,370 53.0\% 2,200 44.7\% Gross Profit 2,985 47.0\% 2,720 55.3\% Operating expenses: Sales and marketing expense 675 10.6\% 580 11.8\% General and administrative expense 410 6.5\% 425 8.6\% Research and development expense 470 7.4\% 390 7.9\% Other expense 400 6.3\% 695 14.1\% Total operating expenses \ 1,955 30.8\% \ 2,090 42.5\% Income before income tax \ 1,030 16.2\% \ 630 12.8\% Income tax expense 230 3.6\% 210 4.3\% Net income (loss) \ 800 12.6\% \ 420 8.5\% Which of the following statements is a valid conclusion based on this data?

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\% - Which of the following statements can be correctly concluded from the above data?

The acid-test ratio is used for which kind of evaluation?

The common-size statement percentages are the same percentages that appear in horizontal analysis.

The ratio of the market price of a share of stock to the dividends paid per share is called the earnings per share.

A corporation has 2,000 shares of $50 par, 10% preferred stock, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. The earnings per share of common stock would be:

The current ratio is a key indicator of a company's ability to pay current liabilities.

Which of the following accurately describes working capital?

When a potential investor is evaluating the market value of a share of stock, the book value per share of stock is an important metric to consider.