Exam 14: Financial Statement Analysis

The Miller Company's current ratio is greater than 1.0 to 1.By paying off some of its accounts payable using cash,what would be the effect on the company's current ratio?

Financial statements for Larned Company appear below: Shareholders' Equity: Larned Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2930 Costs of Goods Sold \ 2050 Gross Margin \ 880 Operating Expenses \ 350 Net Operating Income \ 530 Interest Expense \ 40 Net Income before Taxes \ 490 Income Taxes (30\%) \ 147 Net Income \ 343 Total dividends during Year 2 were $\$ 263,000$ , of which $\$ 12,000$ were for preferred shares. The market price of a common share on December 31, Year 2 was $\$ 160$ . -Larned Company's price-earnings ratio on December 31,Year 2 was closest to which of the following?

Starrs Company has current assets of $300,000 and current liabilities of $200,000.Which of the following transactions would increase its working capital?

At December 31, Curry Co. had the following balances in selected asset accounts: Year 2 Year 1 Cash \ 300 \ 200 Accounts receivable, Net \ 1200 \ 800 Inventory \ 500 \ 300 Prepaid Expenses \ 100 \ 60 Other Assets \ 400 \ 250 Total Assets \ 2500 \ 1610 Curry had current liabilities of $1,000 at December 31, Year 2, and credit sales of $7,200 for Year 2. -Curry Company's acid-test (quick)ratio at December 31,Year 2 was closest to which of the following?

An increase in the market price of a company's common shares will immediately affect which of the following?

Last year,Allen Company's average collectionperiod for accounts receivable was 40 days; this year,it increased to 60 days.Which of the following would most likely account for this change?

Selected financial data for Irvington Company appear below: Account Balances Beginning of year End d year Preferred shares \ 125,000 \ 125,000 Common shares 300,000 400,000 Retained earnings 75,000 185,000 During the year,the company paid dividends of $10,000 on its preferred shares.The company's net income for the year was $120,000.The company's return on common shareholders' equity for the year was closest to which of the following?

The inventory turnover ratio is equal to the average inventory balance divided by the cost of goods sold.

To put the working capital figure into perspective it must be supplemented with other short-term ratios.

Financial statements for Orantes Company appear below: Orange Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2510 Costs of Goods Sold \ 1750 Gross Margin \ 760 Operating Expenses \ 300 Net Operating Income \ 460 Interest Expense \ 30 Net Income before Taxes \ 430 Income Taxes (30\%) \ 129 Net Income \ 301 Total dividends during Year 2 were $\$ 181,000$ , of which $\$ 12,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 280$ . -Orantes Company's dividend yield ratio on December 31,Year 2 was closest to which of the following?

Comparative financial statements for Springville Company for the last two years appear below.The market price of Springville's common shares was $25 per share on December 31,Year 2.During Year 2,dividends of $2,000,000 were paid to preferred shareholders and $10,000,000 to common shareholders. Springville Company Income Statemen For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 280000 Costs of Goods Sold \ 200000 Gross Margin \ 80000 Operating Expenses \ 6133 Net Operating Income \ 18667 Interest Expense \ 5000 Net Income before Taxes \ 13667 Income Taxes (40\%) \ 5467 Net Income \ 8200 Required: Calculate the following for Year 2: a)Dividend payout ratio. b)Dividend yield ratio. c)Price-earnings ratio. d)Accounts receivable turnover. e)Inventory turnover. f)Return on total assets. g)Return on common shareholders' equity. h)Was financial leverage positive or negative for the year? Explain.

Selected data from Sheridan Corporation's year-end financial statements are presented below.The difference between average and ending inventory is immaterial. Current Ratio 2.0 Acid-Test Ratio 1.5 Current Liabilities \ 120,000 Lnventory Turnover 8 times Gross Profit Margin 40\% Prepaid Expenses \ 0 What were Sheridan's sales for the year?

Financial statements for Marcial Company appear below: 11ee3cef_af3d_14b8_8c2a_ab0280ef355e_TB1327_11 -Marcial Company's average collectionperiod (age of receivables)for Year 2 was closest to which of the following? Do not round intermediate calculations.

Last year,Dunn Company purchased $1,920,000of inventory.The cost of good sold was $1,800,000,and the ending inventory was $360,000.What was the inventory turnover?

Financial statements for Orantes Company appear below: Orange Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2510 Costs of Goods Sold \ 1750 Gross Margin \ 760 Operating Expenses \ 300 Net Operating Income \ 460 Interest Expense \ 30 Net Income before Taxes \ 430 Income Taxes (30\%) \ 129 Net Income \ 301 Total dividends during Year 2 were $\$ 181,000$ , of which $\$ 12,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 280$ . -Orantes Company's times interest earned for Year 2 was closest to which of the following?

Financial statements for Orantes Company appear below: Orange Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2510 Costs of Goods Sold \ 1750 Gross Margin \ 760 Operating Expenses \ 300 Net Operating Income \ 460 Interest Expense \ 30 Net Income before Taxes \ 430 Income Taxes (30\%) \ 129 Net Income \ 301 Total dividends during Year 2 were $\$ 181,000$ , of which $\$ 12,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 280$ . -Orantes Company's earnings per common share for Year 2 was closest to which of the following?

If a company has a current ratio greater than 1.0 to 1,repaying a short-termnote payable will increase the current ratio.

Crabtree Company's net income last year was $50,000.The company paid dividends on preferred shares of $20,000,and its average common shareholders' equity was $440,000.The company's return on common shareholders' equity for the year was closest to which of the following?

Last year,Jabber Company had a net income of $180,000,income tax expense of $62,000,and interest expense of $20,000.The company's times interest earned was closest to which of the following?

At the end of the year just completed,Orem Company's total current liabilities were $75,000,and its total long-term liabilities were $225,000.Working capital at year-end was $100,000.If the company's debt-to-equity ratio is 0.30 to 1,total long-term assets must equal which of the following?