Exam 14: Financial Statement Analysis

Common-size statementsare particularly useful when comparing data from different companies.

Financial statements for March Company appear below: March Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1610 Costs of Goods Sold \ 1120 Gross Margin \ 490 Operating Expenses \ 190 Net Operating Income \ 300 Interest Expense \ 50 Net Income before Taxes \ 250 Income Taxes (30\%) \ 75 Net Income \ 175 -March Company's accounts receivableturnover for Year 2 was closest to which of the following?

The net accounts receivablefor Andante Company were $150,000 at the beginning of the most recent year and $190,000 at the end of the year.If the accounts receivable turnover for the year was 8.5,and 15% of total sales were cash sales,what were the total sales for the year?

Financial statements for Larosa Company appear below: Larned Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) hline Sales (All on Account) \ 1870 Costs of Goods Sold \ 1300 Gross Margin \ 570 Operating Expenses \ 220 Net Operating Income \ 350 Interest Expense \ 40 Net Income before Taxes \ 310 Income Taxes (30\%) \ 93 Net Income \ 217 Total dividends during Year 2 were $\$ 47,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31 , Year 2 was $\$ 70$ . -Larosa Company's price-earnings ratio on December 31,Year 2 was closest to which of the following?

Frantic Company had $130,000 in sales on account last year.The beginning accounts receivablebalance was $10,000,and the ending accounts receivable balance was $16,000.The company's accounts receivable turnover was closest to which of the following?

In determining whether a company's financial condition is improving or deteriorating over time,vertical analysis of financial statement data would be more useful than horizontal analysis.

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 accounts receivableturnover for Year 2 was closest to which of the following?

If a company converts a short-termnote payable into a long-term note payable,what would be the effect of this transaction?

Financial statements for Marcell Company appear below: Marcell Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2550 Costs of Goods Sold \ 1780 Gross Margin \ 770 Operating Expenses \ 300 Net Operating Income \ 470 Interest Expense \ 50 Net Income before Taxes \ 420 Income Taxes (30\%) \ 126 Net Income \ 294 -Marcell Company's accounts receivableturnover for Year 2 was closest to which of the following?

Financial statements for March Company appear below: March Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1610 Costs of Goods Sold \ 1120 Gross Margin \ 490 Operating Expenses \ 190 Net Operating Income \ 300 Interest Expense \ 50 Net Income before Taxes \ 250 Income Taxes (30\%) \ 75 Net Income \ 175 -March Company's average collectionperiod (age of receivables)for Year 2 was closest to which of the following?

Financial statements for Oratz Company appear below: Oratz Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1630 Costs of Goods Sold \ 1140 Gross Margin \ 490 Operating Expenses \ 190 Net Operating Income \ 300 Interest Expense \ 30 Net Income before Taxes \ 270 Income Taxes (30\%) \ 81 Net Income \ 189 Total dividends during Year 2 were $\$ 139,000$ , of which $\$ 6,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 260$ . -Oratz Company's current ratio at the end of Year 2 was closest to which of the following?

The following data have been taken from your company's financial records for the current year: Earnings per Share \ 10 Dividend per Share \ 6 Market Price per Share \ 90 Book Value per Share \ 70 What is the price-earnings ratio?

Financial statements for Orange Company appear below: Orange Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2830 Costs of Goods Sold \ 1980 Gross Margin \ 850 Operating Expenses \ 340 Net Operating Income \ 510 Interest Expense \ 30 Net Income before Taxes \ 480 Income Taxes (30\%) \ 144 Net Income \ 336 Total dividends during Year 2 were $\$ 156,000$ , of which $\$ 18,000$ were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $\$ 100$ . -Orange Company's return on total assets for Year 2 was closest to which of the following?

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 average collectionperiod (age of receivables)for Year 2 was closest to which of the following?

Which of the following is true regarding the calculation of return on total assets?

Financial statements for Laroche Company appear below: Shareholders' Equity: Larned Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 2250 Costs of Goods Sold \ 1570 Gross Margin \ 680 Operating Expenses \ 270 Net Operating Income \ 410 Interest Expense \ 30 Net Income before Taxes \ 380 Income Taxes (30\%) \ 114 Net Income \ 266 Total dividends during Year 2 were $\$ 166,000$ , of which $\$ 10,000$ were preferred dividends. The market price of a common share on December 31, Year 2 was $\$ 150$ . -Laroche Company's earnings per common share for Year 2 was closest to which of the following?

Financial statements for March Company appear below: March Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (All on Account) \ 1610 Costs of Goods Sold \ 1120 Gross Margin \ 490 Operating Expenses \ 190 Net Operating Income \ 300 Interest Expense \ 50 Net Income before Taxes \ 250 Income Taxes (30\%) \ 75 Net Income \ 175 -March Company's inventory turnover for Year 2 was closest to which of the following?

Lisa Inc.'s balance sheet appears below: The company's sales for the year were $300,000, its cost of goods sold was $220,000, and its net income was $35,000. All sales were on credit. Dividends paid on preferred shares for the year were $5,000. -Lisa Inc.'s accounts receivableturnover for Year 2 was closest to which of the following?

Condensed financial statements of Miller Company at the beginning and at the end of the current year are given below: End of Current Year Beginning of Current Year Cash \ 10000 \ 8000 Marketable Securities 20000 22000 Accounts Receivable, Net 90000 110000 Inventories 150000 100000 Prepaid and equipment, net 280000 260000 Total Assets \ 550000 \ 500000 Accounts Payable Accrued Short Term 80000 \ 60000 liabilities Bonds Payable 75000 75000 Preferred Shares, 10\%,\ 100 50000 50000 Par Common Shares, \ 10 Par 100000 100000 Additional Paid-In Capital - Common Shares 50000 50000 Retained Earnings 175000 140000 Total Liabilities \& Equity 550000 500000 Millar Company Sales (All on Account) Sales (All on Account) \ 650000 Costs of Goods Sold \ 350000 Gross Margin \ 300000 Operating Expenses \ 20000 Net Operating Income \ 100000 Interest Expense \ 10000 Net Income before Taxes \ 90000 Income Taxes (30\%) \ 4000 Net Income \ 50000 The company paid total dividends of $15,000 during the year,of which $5,000 were to preferred shareholders.The market price of a common share at the end of the year was $30. Required: On the basis of the information given above,fill in the blanks with the appropriate figures. Example: The current ratio at the end of the current year would be computed by dividing $270,000 by $100,000. a)The acid-test (quick)ratio at the end of the current year would be computed by dividing _______________ by ________________. b)The inventory turnover for the year would be computed by dividing _______________ by ________________. c)The debt-to-equity ratio at the end of the current year would be computed by dividing _______________ by ________________. d)The earnings per common share would be computed by dividing _______________ by ________________. e)The accounts receivable turnover for the year would be computed by dividing _______________ by ________________. f)The times interest earned for the year would be computed by dividing _______________ by ________________. g)The return on common shareholders' equity for the year would be computed by dividing _______________ by ________________. h)The dividend yield would be computed by dividing _______________ by ________________.

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 return on total assets for Year 2 was closest to which of the following?