Question 1

Which of the following is NOT correct regarding the rate of return on assets?

Accepted Answer

A) The rate of return on assets measures management's ability to productively employ all its resources. 
B) The rate of return on assets measures the return on all assets used regardless of how the assets are financed. 
C) The rate of return on assets is a measure of profitability. 
D) The rate of return on assets measures the return on the investment made by the owners of the entity. 
A) The rate of return on assets measures management's ability to productively employ all its resources. 
B) The rate of return on assets measures the return on all assets used regardless of how the assets are financed. 
C) The rate of return on assets is a measure of profitability. 
D) The rate of return on assets measures the return on the investment made by the owners of the entity.

Question 2

The following information has been collected regarding Collections Company:
   
Estimate a price per share for Collections' stock using the following equity valuation models:
1.Constant future dividends
2.Constant dividend growth
3.Price-earnings multiple

Accepted Answer

1.Constant Future Dividends:
Price = D/r

Question 3

How are trade receivables used in the calculation of each of the following?

Accepted Answer

The answer of How are trade receivables used in the...

Question 4

The following information is available from the Lyon Company accounting records:
   
Required:
1.Prepare a statement of cash flows in thousands of dollars using the direct method.
2.Calculate the following ratios:
a.Current ratio
b.Quick ratio
c.Working capital to total assets
d.Accounts receivable turnover
e.Age of accounts receivable

Accepted Answer

The answer of The following information is available from the...

Question 5

Spiritlight Ventures shows the following information in their income statements:
   
Calculate the following ratios for 2014 and 2013 using the given data:
(1)Inventory turnover rate.
(2)Number of days' sales in inventories.
(3)Gross profit margin on sales.

Accepted Answer

The answer of Spiritlight Ventures shows the following information in...

Question 6

Which of the following is not a component of the DuPont Framework?

Accepted Answer

A) Return on sales 
B) Asset turnover 
C) Assets to debt 
D) Assets to equity 
A) Return on sales 
B) Asset turnover 
C) Assets to debt 
D) Assets to equity

Question 7

On December 31,2013 and 2014,Tomlin Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding.Additional information:
 
The price-earnings ratio on common stock at December 31,2014,was

Accepted Answer

A) 10 to 1. 
B) 12 to 1. 
C) 14 to 1. 
D) 16 to 1. 
A) 10 to 1. 
B) 12 to 1. 
C) 14 to 1. 
D) 16 to 1.

Question 8

Selected information from the accounting records of the Clemens Company is as follows:
 
What was Clemens' gross margin for 2014?

Accepted Answer

A) $150,000 
B) $200,000 
C) $400,000 
D) $500,000 
A) $150,000 
B) $200,000 
C) $400,000 
D) $500,000

Question 9

Selected information from the accounting records of Carbine Manufacturing follows:
 
What is the number of days' sales in average inventories for the year?

Accepted Answer

A) 132 
B) 109 
C) 101 
D) 66 
A) 132 
B) 109 
C) 101 
D) 66

Question 10

The inventory of Regatta Company averages $1,315,500 at cost.During 2014,sales of $6,995,990 were made at 35 percent above cost.
Using the given data,compute the following:
(1)Inventory turnover rate for 2014.
(2)Number of days' sales in inventory.

Accepted Answer

(1)$6,995,990 / 1.35 = $5,182,

Question 11

Sinbad Company is expected to pay a $0.50 per share dividend at the end of the year.The dividend is expected to grow at a constant rate of 7 percent per year.The required rate of return on the stock is 15 percent.
Required:
What is the value per share of the company's stock?

Accepted Answer

Dividend = $0.50; gr

Question 12

When using common-size statements,

Accepted Answer

A) data may be selected for the same business as of different dates, or for two or more businesses as of the same date. 
B) relationships should be stated in terms of ratios. 
C) dollar changes are reported over a period of at least three years. 
D) All of these are correct. 
A) data may be selected for the same business as of different dates, or for two or more businesses as of the same date. 
B) relationships should be stated in terms of ratios. 
C) dollar changes are reported over a period of at least three years. 
D) All of these are correct.

Question 13

The following information has been collected for Lightfoot Company:
   
Required:
Estimate the price per share for Lightfoot Company's common stock using the discounted free cash flow model.

Accepted Answer

@#IMG-DLM& At the end of 2017,the perpetuity of $3

Question 14

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below:
    
-Refer to the Sculley Corporation information above.Sculley's quick (acid test)ratio as December 31,2014,is

Accepted Answer

A) 1.44 to 1. 
B) 1.50 to 1. 
C) 1.67 to 1. 
D) 1.66 to 1. 
A) 1.44 to 1. 
B) 1.50 to 1. 
C) 1.67 to 1. 
D) 1.66 to 1.

Question 15

Refer to the Sculley Corporation information above.Sculley's turnover of assets and number of times interest earned for 2014 are respectively

Accepted Answer

The answer of Refer to the Sculley Corporation information above.Sculley's...

Question 16

In comparing the current ratios of two companies,why is it invalid to assume that the company with the higher current ratio is the better company?

Accepted Answer

A) The two companies may be different sizes. 
B) A high current ratio may indicate inadequate inventory on hand. 
C) The two companies may define working capital in different terms. 
D) A high current ratio may indicate inefficient use of various assets and liabilities. 
A) The two companies may be different sizes. 
B) A high current ratio may indicate inadequate inventory on hand. 
C) The two companies may define working capital in different terms. 
D) A high current ratio may indicate inefficient use of various assets and liabilities.

Question 17

The following data were abstracted from the records of Ballistic Corporation for the year:
 
How many times was bond interest earned?

Accepted Answer

A) 18.0 
B) 15.0 
C) 11.0 
D) 10.0 
A) 18.0 
B) 15.0 
C) 11.0 
D) 10.0

Question 18

From the standpoint of the stockholders of a company,the ratio that measures the overall performance of a company would be calculated using which of the following?

Accepted Answer

A) Average total assets and net income 
B) Average stockholders' equity and net sales 
C) Average stockholders' equity and net income 
D) Net sales and average total assets 
A) Average total assets and net income 
B) Average stockholders' equity and net sales 
C) Average stockholders' equity and net income 
D) Net sales and average total assets

Question 19

A useful tool in financial statement analysis is the common-size financial statement.What does this tool enable the financial analyst to do?

Accepted Answer

A) Evaluate financial statements of companies within a given industry of approximately the same value. 
B) Determine which companies in the same industry are at approximately the same stage of development. 
C) Ascertain the relative potential of companies of similar size in different industries. 
D) Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over time or between companies within a given industry without respect to relative size. 
A) Evaluate financial statements of companies within a given industry of approximately the same value. 
B) Determine which companies in the same industry are at approximately the same stage of development. 
C) Ascertain the relative potential of companies of similar size in different industries. 
D) Compare the mix of assets, liabilities, capital, revenue, and expenses within a company over time or between companies within a given industry without respect to relative size.

Question 20

Whereis Company is expected to pay a $0.50 per share dividend at the end of the year.The required rate of return on the stock is 15 percent.
Required:
What is the value per share of the company's stock?

Accepted Answer

Dividend = $0.50; r = 15%
Pric

Exam 23: Analysis of Financial Statements

Which of the following is NOT correct regarding the rate of return on assets?

The following information has been collected regarding Collections Company: Estimate a price per share for Collections' stock using the following equity valuation models: 1.Constant future dividends 2.Constant dividend growth 3.Price-earnings multiple

How are trade receivables used in the calculation of each of the following?

Spiritlight Ventures shows the following information in their income statements: Calculate the following ratios for 2014 and 2013 using the given data: (1)Inventory turnover rate. (2)Number of days' sales in inventories. (3)Gross profit margin on sales.

Which of the following is not a component of the DuPont Framework?

On December 31,2013 and 2014,Tomlin Corporation had 100,000 shares of common stock and 50,000 shares of noncumulative and nonconvertible preferred stock issued and outstanding.Additional information: The price-earnings ratio on common stock at December 31,2014,was

Selected information from the accounting records of the Clemens Company is as follows: What was Clemens' gross margin for 2014?

Selected information from the accounting records of Carbine Manufacturing follows: What is the number of days' sales in average inventories for the year?

The inventory of Regatta Company averages $1,315,500 at cost.During 2014,sales of $6,995,990 were made at 35 percent above cost. Using the given data,compute the following: (1)Inventory turnover rate for 2014. (2)Number of days' sales in inventory.

Sinbad Company is expected to pay a $0.50 per share dividend at the end of the year.The dividend is expected to grow at a constant rate of 7 percent per year.The required rate of return on the stock is 15 percent. Required: What is the value per share of the company's stock?

When using common-size statements,

The following information has been collected for Lightfoot Company: Required: Estimate the price per share for Lightfoot Company's common stock using the discounted free cash flow model.

Selected information from the 2014 and 2013 financial statements of Sculley Corporation is presented below: -Refer to the Sculley Corporation information above.Sculley's quick (acid test)ratio as December 31,2014,is

Refer to the Sculley Corporation information above.Sculley's turnover of assets and number of times interest earned for 2014 are respectively

In comparing the current ratios of two companies,why is it invalid to assume that the company with the higher current ratio is the better company?

The following data were abstracted from the records of Ballistic Corporation for the year: How many times was bond interest earned?

From the standpoint of the stockholders of a company,the ratio that measures the overall performance of a company would be calculated using which of the following?

A useful tool in financial statement analysis is the common-size financial statement.What does this tool enable the financial analyst to do?

Whereis Company is expected to pay a $0.50 per share dividend at the end of the year.The required rate of return on the stock is 15 percent. Required: What is the value per share of the company's stock?

Financial Reporting

A Review of the Accounting Cycle

The Balance Sheet and Notes to the Financial Statements

The Income Statement

Statement of Cash Flows and Articulation

Earnings Management

The Revenuereceivablescash Cycle

Revenue Recognition

Inventory and Cost of Goods Sold

Investments in Noncurrent Operating Assets-Acquisition

Investments in Noncurrent Operating Assets-Utilization and Retirement

Debt Financing

Equity Financing

Investments in Debt and Equity Securities

Leases

Income Taxes

Employee Compensation-Payroll,pensions, Other Compissues

Earnings Per Share

Derivatives, contingencies, business Segments, and Interim Reports

Accounting Changes and Error Corrections

Statement of Cash Flows Revisited

Accounting in a Global Market

Filters