Question 1

Clairmont Industries reported Net income of $283,000 and average Total assets of $637,000. The Return on total assets is:

Accepted Answer

A)  44.4%. 
B)  88.8%. 
C)  61.5%. 
D)  125.1%. 
E)  55.6%. 
A)  44.4%. 
B)  88.8%. 
C)  61.5%. 
D)  125.1%. 
E)  55.6%.

Question 2

The comparison of a company's financial condition and performance to a base amount is known as
________.

Accepted Answer

The answer of The comparison of a company's financial condition...

Question 3

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.

Accepted Answer

A) True 
 B)False

Question 4

Horizontal analysis is used to reveal patterns in data covering two or more successive periods.

Accepted Answer

A) True 
 B)False

Question 5

A corporation reports the following year-end balance sheet data. The company's debt-to-equity ratio equals: $$\begin{array} { l | r | l | r } 
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 75,000 \
\hline \text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\hline \text { Inventory } & 60,000 & \text { Common stock } & 100,000 \
\hline \text { Equipment } & \underline { 145,000 } & \text { Retained earnings } & \$ 90,000 \
\hline \text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \
\hline
\end{array}$$

Accepted Answer

A)  0.58 
B)  1.27 
C)  0.37 
D)  0.63 
E)  2.07 
A)  0.58 
B)  1.27 
C)  0.37 
D)  0.63 
E)  2.07

Question 6

A corporation reports the following year-end balance sheet data. The company's working capital equals: $\begin{array}{lrcc}
\text { Cash } & \$ 400,000 & \text { Current liabilities } & \$ 75,000 \
\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\text { Inventory } & 60,000 & \text { Common stock } & 100,000
\end{array}$

$\begin{array}{cclc}
\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \
\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000
\end{array}$

Accepted Answer

A)  $75,000 
B)  $155,000 
C)  $300,000 
D)  $80,000 
E)  $190,000 
A)  $75,000 
B)  $155,000 
C)  $300,000 
D)  $80,000 
E)  $190,000

Question 7

Liquidity refers to the availability of resources to meet short-term cash requirements.

Accepted Answer

A) True 
 B)False

Question 8

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Question 9

Vertical analysis is the comparison of a company's financial condition and performance across time.

Accepted Answer

A) True 
 B)False

Question 10

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the following selected financial information from Graceworks Corp. Compute the company's inventory turnover for Year 2. $$\begin{array} { | l | r | r | } 
\hline & \text { Year 2 } & { \text { Year 1 } } \
\hline \text { Merchandise inventory } & 271,000 & 253,500 \
\hline \text { Cost of goods sold } & 486,400 & 433,100 \
\hline
\end{array}$$

Accepted Answer

A)  1.71. 
B)  1.75. 
C)  0.93. 
D)  1.79. 
E)  1.85. 
A)  1.71. 
B)  1.75. 
C)  0.93. 
D)  1.79. 
E)  1.85.

Question 12

Refer to the following selected financial information from Marston Company. Compute the company's accounts receivable turnover for Year 2. $$\begin{array} { | l | r | r | } 
\hline &{ \text { Year 2 } } & { \text { Year 1 } } \
\hline \text { Accounts receivable, net } & 86,500 & 82,750 \
\hline \text { Net sales } & 723,000 & 693,000 \
\hline
\end{array}$$

Accepted Answer

A)  4.78. 
B)  8.54. 
C)  8.59. 
D)  8.36. 
E)  8.37. 
A)  4.78. 
B)  8.54. 
C)  8.59. 
D)  8.36. 
E)  8.37.

Question 13

Three of the most common tools of financial analysis are (1) ________, (2) ________, and (3)________.

Accepted Answer

horizontal analysis;

Question 14

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

A) True 
 B)False

Question 15

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

A) True 
 B)False

Question 16

Refer to the following selected financial information from Marston Company. Compute the company's days' sales uncollected for Year 2. (Use 365 days a year.) $$\begin{array} { | l | r | r | } 
\hline & { \text { Year 2 } } & { \text { Year 1 } } \
\hline \text { Accounts receivable, net } & 86,500 & 82,750 \
\hline \text { Net sales } & 723,000 & 693,000 \
\hline
\end{array}$$

Accepted Answer

A)  42.7. 
B)  46.2. 
C)  85.4. 
D)  43.9. 
E)  43.7. 
A)  42.7. 
B)  46.2. 
C)  85.4. 
D)  43.9. 
E)  43.7.

Question 17

Refer to the following selected financial information from Shakley's Incorporated. Compute the company's return on total assets for Year 2. $$\begin{array} { | l | r | r | } 
\hline &  { \text { Year 2 } } & \text { Year 1 } \
\hline \text { Net sales } & \$ 478,500 & \$ 426,250 \
\hline \text { Cost of goods sold } & 276,300 & 250,120 \
\hline \text { Interest expense } & 9,700 & 10,700 \
\hline \text { Net income before tax } & 67,250 & 52,680 \
\hline \text { Net income after tax } & 46,050 & 39,900 \
\hline \text { Total assets } & 317,100 & 288,000 \
\hline \text { Total liabilities } & 181,400 & 167,300 \
\hline \text { Total equity } & 135,700 & 120,700 \
\hline
\end{array}$$

Accepted Answer

A)  2.6%. 
B)  15.2%. 
C)  22.2%. 
D)  9.6%. 
E)  14.5%. 
A)  2.6%. 
B)  15.2%. 
C)  22.2%. 
D)  9.6%. 
E)  14.5%.

Question 18

When an item has a value in the base period and zero in the analysis period, the decrease is 0 percent.

Accepted Answer

A) True 
 B)False

Question 19

Information from a manufacturing company's current year income statement follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned.
 $$\begin{array} { |l | l |} 
\hline \text { Sales } & \$ 850,000 \ 
\hline \text { Cost af goods sold } & 455,000 \
\hline \text { Gross profit } & \$ 395,000 \
\hline \text { Operating expenses } & 260,000 \
\hline \text { Operating income } & \$ 135,000 \
\hline \text { Interest expense } & \underline { 32,000 } \
\hline \text { Income before taxes } & \$ 103,000 \
\hline \text { Income taxes expente } & 12,400 \
\hline \text { Net income } & \$ 90,600
\end{array}$$

Accepted Answer

(a) $90,600/$850,000

Question 20

The current year-end balance sheet data for a company are shown below. Calculate the company's:
(a) working capital
(b) current ratio
(c) acid-test ratio. Assets:

Accepted Answer

None

Exam 17: Analysis of Financial Statements

Clairmont Industries reported Net income of $283,000 and average Total assets of $637,000. The Return on total assets is:

The comparison of a company's financial condition and performance to a base amount is known as ________.

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%.

Horizontal analysis is used to reveal patterns in data covering two or more successive periods.

Liquidity refers to the availability of resources to meet short-term cash requirements.

Profitability is the ability to generate positive market expectations.

Vertical analysis is the comparison of a company's financial condition and performance across time.

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Refer to the following selected financial information from Graceworks Corp. Compute the company's inventory turnover for Year 2. Year 2 Year 1 Merchandise inventory 271,000 253,500 Cost of goods sold 486,400 433,100

Refer to the following selected financial information from Marston Company. Compute the company's accounts receivable turnover for Year 2. Year 2 Year 1 Accounts receivable, net 86,500 82,750 Net sales 723,000 693,000

Three of the most common tools of financial analysis are (1) ________, (2) ________, and (3)________.

Financial analysis only refers to the communication of relevant financial information to decision makers.

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Refer to the following selected financial information from Marston Company. Compute the company's days' sales uncollected for Year 2. (Use 365 days a year.) Year 2 Year 1 Accounts receivable, net 86,500 82,750 Net sales 723,000 693,000

When an item has a value in the base period and zero in the analysis period, the decrease is 0 percent.

The current year-end balance sheet data for a company are shown below. Calculate the company's: (a) working capital (b) current ratio (c) acid-test ratio. Assets:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters

Three of the most common tools of financial analysis are (1) , (2) , and (3).