Exam 14: Financial Statement Analysis

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

The numerator in calculating the accounts receivable turnover is

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

Times interest earned is computed as

Vertical analysis refers to comparing the financial statements of a single company over several years.

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

The balance sheets at the end of each of the first two years of operations indicate the following: $\text { Kellman Company }$ Year 2 Year 1 Total current assets \ 600,000 \ 560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 125,000 65,000 Total long-term liabilities 350,000 250,000 Preferred 9\% stock, \ 100 par 100,000 100,000 Common stock, \ 10 par 600,000 600,000 Paid-in capital in excess of par-Common stock 75,000 75,000 Retained earnings 310,000 210,000 -Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation to two decimal places and final answers to one decimal place.)

The numerator of the return on total assets is

The particular analytical measures chosen to analyze a company may be influenced by all of the following except

Horizontal analysis of comparative financial statements includes

Assume the following sales data for a company: Current year \ 325,000 Preceding year 250,000 What is the percentage increase in sales from the preceding year to the current year?

When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item after income from continuing operations on the income statement.

A company reports the following: Sales \ 2,520,000 Average total assets (excluding long-term investments) 1,400,000 ​ Determine the asset turnover ratio. Round your answer to one decimal place.

A company can compare its financial data to the data of other companies and industry averages to evaluate its position.

An advantage of the current ratio is that it considers the makeup of the current assets.

The following data are taken from the balance sheet at the end of the current year. ​ Cash \ 154,000 Accounts receivable 210,000 Inventory 240,000 Prepaid expenses 15,000 Marketable securities 350,000 Property, plant, and equipment 375,000 Accounts payable 245,000 Accrued liabilities 4,000 Income tax payable 10,000 Notes payable, short-term 85,000 ​ Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Round ratios to one decimal place. ​

In a vertical analysis, the base for cost of goods sold is

If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

The following data are taken from the financial statements: Current Preceding Year Year Sales \ 3,600,000 \ 4,000,000 Cost of goods sold 2,000,000 2,700,000 Beginning inventory 372,000 352,000 Inventory, end of year 390,000 372,000 ​ (a) Determine for each year (1) the inventory turnover, round answer to one decimal place. (2) the number of days' sales in inventory. Round intermediate calculations to whole numbers and final answers to two decimal places. (b) Comment on the favorable and unfavorable trends revealed by the data