Question 1

Standards for comparisons in financial statement analysis do not include:

Accepted Answer

A)  Management standards. 
B)  Guidelines (rules of thumb). 
C)  Competitors' standards. 
D)  Intra-company standards. 
E)  Industry standards. 
A)  Management standards. 
B)  Guidelines (rules of thumb). 
C)  Competitors' standards. 
D)  Intra-company standards. 
E)  Industry standards.

Question 2

A company's calendar-year financial data are shown below. The company had total assets of
$339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of
$19,500 were paid during the year. Calculate the following ratios for the company:

Accepted Answer

None

Question 3

A high level of expected risk suggests a low price-earnings (PE) ratio.

Accepted Answer

A) True 
 B)False

Question 4

Refer to the following selected financial information from Frankle Corp. Compute the company's working capital. $$\begin{array} { | l | r | } 
\hline & \
\hline \text { Current Assets } & 306,450 \
\hline \text { Plant assets } & 338,000 \
\hline \text { Current Liabilities } & 107,800 \
\hline \text { Net sales } & 676,000 \
\hline \text { Net Income } & 75,000 \
\hline
\end{array}$$

Accepted Answer

A)  $568,200. 
B)  $198,650. 
C)  $230,200. 
D)  $536,650. 
E)  $231,450. 
A)  $568,200. 
B)  $198,650. 
C)  $230,200. 
D)  $536,650. 
E)  $231,450.

Question 5

The market price of Horokhiv Corporation's common stock at the start of 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The Dividend yield ratio is:

Accepted Answer

A)  144.8%. 
B)  6.5%. 
C)  6.9%. 
D)  14.5%. 
E)  7.4%. 
A)  144.8%. 
B)  6.5%. 
C)  6.9%. 
D)  14.5%. 
E)  7.4%.

Question 6

Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:

Accepted Answer

A)  Accounts receivable turnover ratio. 
B)  Profit margin. 
C)  Days' sales uncollected. 
D)  Average accounts receivable ratio. 
E)  Current ratio. 
A)  Accounts receivable turnover ratio. 
B)  Profit margin. 
C)  Days' sales uncollected. 
D)  Average accounts receivable ratio. 
E)  Current ratio.

Question 7

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

Accepted Answer

A) True 
 B)False

Question 8

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the following selected financial information from Shakley's Incorporated. Compute the company's debt-to-equity ratio 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)  0.75. 
B)  2.63. 
C)  2.34. 
D)  1.34. 
E)  1.75. 
A)  0.75. 
B)  2.63. 
C)  2.34. 
D)  1.34. 
E)  1.75.

Question 10

Standards for comparison are not generally necessary when making judgments about a company's performance.

Accepted Answer

A) True 
 B)False

Question 11

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals 7.85%.

Accepted Answer

A) True 
 B)False

Question 12

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Accepted Answer

Earnings per share = $78,000/1

Question 13

The following information is available for the Starr Corporation:
 $$\begin{array} {| l | l |} 
\hline \text { Sales } & \$ 750,000 \ 
\hline \text { Cost af goods sold } & 450,000 \
\hline \text { Gross profit } & 300,000 \
\hline \text { Operating income } & 85,000 \
\hline \text { Net income } & 42,000 \
\hline \text { Inventory, beginning-year } & 71,200 \
\hline \text { Inventory, end-of-year } & 48,800
\end{array}$$ Calculate the company's inventory turnover and its days' sales in inventory.

Accepted Answer

Inventory turnover = $450,000/

Question 14

The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below.
(1) For both companies for 2018, compute the:
(a) Current ratio
(b) Acid-test ratio
(c) Accounts receivable turnover
(d) Inventory turnover
(e) Days' sales in inventory
(f) Days' sales uncollected
Which company do you consider to be the better short-term credit risk? Explain.
(2) For both companies for 2018, compute the:
(a) Profit margin ratio
(b) Return on total assets
(c) Return on common stockholders' equity
Which company do you consider to have better profitability ratios?
   Kouris Company Consolidated Balance Sheets(in millions)
   Assets
 $\begin{array}{|l|l|l|}
\hline\text { Current assets: }\
\hline \text { Cash and cash equivalents } & \$ 634.0 & \$ 575.5 \
\hline \text { Accounts receivable, net of allowance } & 2,101.1 & 1,804.1 \
\hline \text { Inventories } & 1,514.9 & 1,373.8 \
\hline \text { Other current assets } & 429.9 & 401.3 \
\hline \text { Total current assets } & 4,679.9 & 4,154.7 \
\hline \text { Property, plant, and equipment, net } & 1,620.8 & 1,614.5 \
\hline \text { Other long term assets } & 413.2 & 670.8 \
\hline \text { Total assets } & \underline{\underline{ \$ 6,713.9 }}& \underline{\underline{\$ 6,440.0}} \
\hline 
\end{array}$
 Liabilities and Stockholders' Equity
 \(\begin{array}{|l|l|l|}
\hline\text { Current liabilities: }\
\hline \text { Current portion of long-term debt } & \$ 205.7 & \$ 55.3 \
\hline \text { Notes payable } & 75.4 & 425.2 \
\hline \text { Accounts payable } & 572.7 & 504.4 \
\hline \text { Accrued liabilities } & 1,054.2 & 765.3 \
\hline \text { Income taxes payable } & 107.2 & 83.0 \
\hline \text { Total current liabilities } & 2,015.2 & 1,833.2 \
\hline \text { Long term liabilities } & 708.0 & 767.8 \
\hline \text { Total liabilities } & 2,723.2 & 2,601.0 \
\hline\text { Stockholders' equity: }\
\hline \text { Common stock } & 2.8 & 2.8 \
\hline \text { Contributed capital in excess of par value } & 589.0 & 538.7 \
\hline \text { Unearned stock compensation } & (0.6) & (5.1) \
\hline \text { Accumulated other comprehensive loss } & (239.7) & (192.4) \
\hline \text { Retained earnings } & \underline{3,639.2} & 3,495.0 \
\hline \text { Total stockholders' equity } & \underline{3,990.7} & \underline{3,839.0} \
\hline \text { Total liabilities and stockholders' equity } & \$ 6,713.9 & \$ 6,440.0 \
\hline
\end{array}\)  Kouris Company Consolidated Statement of Income
May 31, 2018
 
 $$\begin{array}{l}
\text { (in millions) }\
\begin{array} { |l | c| } 
\hline \text { Revenues } & \$ 10,697.0 \
\hline \text { Cost of sales } & 6,313.6 \
\hline \text { Gross profit } & 4,383.4 \
\hline \text { Operating expenses } & 3,137.6 \
\hline \text { Operating income } & 1,245.8 \
\hline \text { Interest expense } & 42.9 \
\hline \text { Other revenues and expenses } & 79.9 \
\hline \text { Income before tax } & 1,123.0 \
\hline \text { Income taxes } & 382.9 \
\hline \text { Income before effect of accounting change } & 740.1 \
\hline \text { Cumulative effect of accounting change, net of tax } & 266.1 \
\hline \text { Net income } & \$ 474.0\
\hline
\end{array}
\end{array}$$ Brittania, Inc.
Consolidated Balance Sheets
 $$\begin{array} { | l | l | l | } 
\hline \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad \quad& \text { Jan. 3, } & \text { Jan. 4. } \
\hline & 2018 & 2017 \
\hline
\end{array}$$ Assets
Current assets:
 $$\begin{array} { | l | l | l |} 
\hline \text { Cash and cash equivalents } & \$ 34.5 & \$ 22.2 \
\hline \text { Accounts receivable, net af allowanes } & 15.5 & 14.7 \
\hline \text { Inventories } & 27.2 & 28.4 \
\hline \text { Other current assets } & 3.5 & 4.2 \
\hline \text { Total current assets } & 80.7 & 69.5 \
\hline \text { Property. plant, and equipment, net } & 5.7 & 7.0 \
\hline \text { Other long term assets } & 1.1 & 1.5 \
\hline \text { Total assets } & \$ 87.5 & \$ 78.0 \
\hline
\end{array}$$ 
 
$\begin{array}{l}
\text { Liabilities and Stockholders' Equity }\
\begin{array} { |l | c | c| } 
\hline \text { Current liabilities: } & & \
\hline \text { Accounts payable } & \$ 8.5 & \$ 6.6 \
\hline \text { Accrued liabilities } & 7.8 & 5.6 \
\hline \text { Total current liabilities } & 16.3 & 12.2 \
\hline \text { Long term liabilities } & 2.5 & 2.6 \
\hline \text { Total liabilities } & 18.8 & 14.8 \
\hline \text { Stockholders' equity: } & & \
\hline
\end{array}
\end{array}$

$$\begin{array} { | l | l | l |} 
\hline \text { Common stock } & 2.3 & 2.3 \
\hline \text { Contributed capital in excess of par value } & 17.8 & 17.4 \
\hline \text { Unearned stock compensation } & ( 0.1 ) & ( 0.5 ) \
\hline \text { Accumulated other comprehentive loss } & ( 0.9 ) & ( 1.3 ) \
\hline \text { Treasury stock } & ( 6.3 ) & ( 5.4 ) \
\hline \text { Retained earnings } & 55.9 & 50.7 \
\hline \text { Total stockholders' equity } & 68.7 & 63.2 \
\hline \text { Total liabilities and stockholders' equity } & \$ 87.5 &\$ 78 . 0
\end{array}$$

$\begin{array}{c}
\text { Brittania, Inc.}\
\text { Consolidated Statement of Income }\
\text { January 3, 2018 (in millions)}\ 
\begin{array}{lc}
\text { Revenues } & \$ 133.5 \
\text { Cost of sales } & \underline{87.3} \
\text { Grosprofit } & 46.2 \
\text { Operating expenses } & \underline{37.3} \
\text { Opiatating income } & 8.9
\end{array}\end{array}$

$\begin{array}{l|l}
\text { Interest expense } & (0.1) \
\hline \text { Other revenues and expenses } & 0.3 \
\hline \text { Income before tax } & 9.1 \
\hline \text { Income taxes } & 3.9 \
\hline \text { Net income } & \$ \quad 5.2
\end{array}$

Accepted Answer

@#IMG-DLM&
Brittania has higher current ratios and

Question 15

Earnings per share are calculated only on income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

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

Question 17

_________________financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

Accepted Answer

The answer of _________________financial statements are reports where financial amounts...

Question 18

Comparative statements for Warmer Corporation are shown below:
Warmer Corporation Comparative Income Statements For the years ended December 31
 $\begin{array}{|l|r|r|r|}
\hline&2018&2017&2016\
\hline \text { Sales } & \$ 14,800 & \$ 13,229 & \$ 13,994 \
\hline \text { Cost of goods sold } & 8,225 & 8,661 & 8,375 \
\hline \text { Gross profit } & 6,575 & 4,568 & 5,619 \
\hline \text { Operating expenses } & 3,664 & 3,576 & 3,487 \
\hline \text { Operating income } & \$ 2,911 & \$ 992 & \$ 2,132
\end{array}$ Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2016 as the base year.Comment on the results.

Accepted Answer

Warmer Corporation Comparative Income St

Question 19

Comparative financial statements are reports that show financial amounts in side by side columns on a single statement for analysis purposes.

Accepted Answer

A) True 
 B)False

Question 20

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

A) True 
 B)False

Exam 17: Analysis of Financial Statements

Standards for comparisons in financial statement analysis do not include:

A high level of expected risk suggests a low price-earnings (PE) ratio.

Refer to the following selected financial information from Frankle Corp. Compute the company's working capital. Current Assets 306,450 Plant assets 338,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000

The market price of Horokhiv Corporation's common stock at the start of 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The Dividend yield ratio is:

Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

Standards for comparison are not generally necessary when making judgments about a company's performance.

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals 7.85%.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Earnings per share are calculated only on income from continuing operations.

_________________financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

Comparative financial statements are reports that show financial amounts in side by side columns on a single statement for analysis purposes.

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

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

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