Exam 15: Financial Statement Analysis

La Paz Company reported the following information Which of the following statements is an accurate conclusion about 2014 balances, based on the above data?

Please refer to the vertical analysis of a section of a balance sheet, shown below: (Dollar amounts in millions) 2014 2013 Amount \% of Total Amount \% of Total Assets Current assets: Cash \ 10,000 3.7\% \ 7,200 2.9\% Accounts receivable, net 15,600 5.7\% 16,800 6.7\% Inventory 38,000 13.9\% 31,000 12.4\% Total current assets 63,600 23.2\% 55,000 22.0\% Property, plant and equipment, net 195,000 71.3\% 168,000 67.2\% Other long-term assets 15,000 5.5\% 27,100 10.8\% Total assets \ 273,600 100.0\% \ 250,100 100.0\% - Which of the following statements accurately describes the 13.9% shown for Inventory in 2014?

Oglethorpe Company reports the following information from the vertical analysis of their balance sheet: Current assets: 23.5 % in 2014 23.9% in 2013 Which of the following statements could be logically concluded from the above data?

The rate of return on common stockholders' equity is a commonly used way to compare the profitability of one company to another.

What kind of information does a company's times-interest-earned ratio provide?

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 this data, an analyst could conclude that Arlington's performance is not as good as Bardo's because it has much higher sales and marketing expenses.

Common-size statements allow the comparison of two or more companies with different amounts of net sales and assets.

A company reported the following amounts of net income: 2011 \ 18,000 2012 \ 24,000 2013 \ 26,000 - Which of the following is the percentage change in net income from 2011 to 2012?

Benchmarking means comparing a company's financial results to:

What kind of information does a company's asset turnover ratio provide?

The debt ratio is used for which kind of evaluation?

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?

Which of the following ratios is a measure of a company's ability to pay all current liabilities if they come due immediately?

Which of the following signifies that a company may be unable to pay its current liabilities if they suddenly come due?

The asset turnover ratio is used for which kind of evaluation?

Horizontal analysis compares each item in the income statement to the net sales amount.

What kind of information does the dividend payout ratio provide?

Which of the following is a "red flag" suggesting that a company may be in trouble?

Rate of return on net sales is a measure of a company's profitability.

What does the term financial leverage mean?