Exam 14: Financial Statement Analysis

Draban Company's working capital is $38,000,and its current liabilities are $59,000.The company's current ratio is closest to which of the following?

Krakov Company has total assets of $170,000 and total liabilities of $80,000.The company's debt-to-equity ratio is closest to which of the following?

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 times interest earned 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 return on total assets for Year 2 was closest to which of the following?Do not round intermediate calculations.

Which of the following events is unique to the calculation of fully diluted earnings per share?

The following data have been taken from your company's financial records for the current year: Eanings per Share \ 15 Dividend per Share \ 9 Market Price per Share \ 120 Book Value per Share \ 90 What is the price-earnings ratio?

Selected financial data for Barnstable Company appear below: Year 2 Year 1 Sales (in thousands) Operating Expense \ 1,500 \ 1,200 Interest Expense \ 450 \ 400 Cost of Goods Sold \ 75 \ 30 Dividends Declared and Paid \ 900 \ 720 -Between Year 1 and Year 2,what happened to the times interest earned?

Irally Company,a retailer,had cost of goods sold of $150,000 last year.The beginning inventory balance was $26,000,and the ending inventory balance was $24,000.The company's average sale period (turnover in days)was closest to which of the following?

The price-earnings ratio is determined by dividing the price of a product by its profit margin.

Braverman Company's net income last year was $75,000,and its interest expense was $10,000.Total assets at the beginning of the year were $650,000,and total assets at the end of the year were $610,000.The company's income tax rate was 30%.The company's return on total assets for the year was closest to which of the following?

The price-earnings ratio is calculated by dividing the market price per share by the current earnings per share.

Selected data for the Boat Rental Company follow: Current Year Prior Year Preferred Shares, 8\% Par Value \ 50 \ 250000 \ 250000 Common Shares, Per Value \ 10 \ 500000 \ 500000 Retained Earnings at End of Year \ 257000 \ 240000 Net Income \ 102000 \ 90000 Dividends Paid on Preferred Shares \2 0000 \2 0000 Dividends Paid on Common Shares \ 55000 \5 0000 Quoted Market Price per Common Share at Year End \ 25 \2 0 -What is the book value per share for the current year,rounded to the nearest cent?

M.K.Berry is the managing director of CE Ltd.a small,family-owned company that manufactures cutlery.His company belongs to a trade association that publishes a monthly magazine.The latest issue of the magazine contains a very brief article based on the analysis of the accounting statements published by the 40 companies that manufacture this type of product.The article contains the following table: Average for All Companies In the Industry Return on Shareholders' Eqquity 33\% Return on Total Assets 29\% Gross Margin Percentage 30\% Current Ratio 1.9:1 Average Sale Period 37 days Average Collection Period 41 days CE Ltd's latest financial statementsare as follows: CE LTd. Income Statemen For the year end 31 October (in thousands) Sales £900 Cost Of Goods Sold £720 Gross Margin £180 Selling and Administrative Expenses £55 Interest £15 Net Income £110 The country in which the company operates has no corporate income tax.No dividends were paid during the year.All sales are on account. CE Ltd. Balance Sheets As of 31 October (in thousands) This Year Last Year Current assets: Cash £5 £20 Accounts Receivable 120 110 Inventories 96 80 Noncurrent assets 500 460 Total assets £721 £670 Current liabilities: Accounts payable £147 £206 Noncurrent liabilities: Bonds payable 150 150 Common shares 100 100 Retained earnings 324 214 Total liabilities and shareholders' equity £721 £670 Required: a)Calculate each of the ratios listed in the magazine article for this year for CE,and comment briefly on CE Ltd.'s performance in comparison to the industry averages. b)Explain why it could be misleadingto compare CE Ltd.'s ratios with those taken from the article.

The Dawson Corporation projects the following for the upcoming year: Earnings before Interest and Taxes \3 5 million Interest Expense \5 million Preferred Shares Dividends \ 4 million Common Shares Dividend Payout Ratio 30\% Average Number of Common Shares Outstanding 2 million Effective Corporate Income Tax Rate 40\% -What is the expected dividend per common share?

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 book value per common share at December 31,Year 2,was closest to which of the following?

Harris Company,a retailer,had cost of goods sold of $290,000 last year.The beginning inventory balance was $26,000,and the ending inventory balance was $24,000.The company's inventory turnover was closest to which of the following?

The following account balances have been provided for the end of the most recent year: Total Assets \ 150,000 Total Shareholders' Equity \ 120,000 Total Common Shares \ 50,000(5,000 shares) Total Preferred Shares \ 10,000(1,000 shares ) What is the book value per common share?

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 earnings per common share 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 earnings per common share for Year 2 was closest to which of the following?Do not round intermediate calculations.

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 average sale period (turnover in days)for Year 2 was closest to which of the following?