Exam 14: Financial Statement Analysis

The following information was taken from the financial statement of Fox Resources for December 31 of the current fiscal year: ​ Common stock, \ 20 par value (no change during the year) \ 5,000,000 Preferred 10\% stock, \ 40 par (no change during the year) 2,000,000 ​ The net income was $600,000, and the declared dividends on the common stock were $125,000 for the current year. The market price of the common stock is $20 per share. ​ Calculate for the common stock: (a) earnings per share (b) the price-earnings ratio (c) the dividends per share and the dividend yield ​ Round to one decimal place except earnings per share, which should be rounded to two decimal places.

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

CorpCo gathered the following information at the end of the current fiscal year: ​ Dividends on common stock \ 125,000 Market price per share of common stock \ 115.00 Shares of common stock outstanding 5,000 Dividends on preferred stock \ 65,000 Shares of preferred stock outstanding 600 Earnings per share on common stock \ 102.00 Dividends per share of common stock \ 25.00 Net income \ 575,000 ​ What is CorpCo's price-earnings ratio? Round your answer to one decimal place. ​

A clean audit opinion is not the same as an unmodified opinion.

In horizontal analysis, each item is expressed as a percentage of the

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Assets Cash and short-term investments \ 30,000 Accounts receivable (net) 20,000 Inventory 15,000 Property, plant, and equipment 185,000 Total assets \ 250,000 Liabilities and Stockholders' Equity Current liabilities \ 45,000 Long-term liabilities 70,000 Common stock 80,000 Retained earnings 55,000 Total liabilities and stockhol ders' equity \ 250,000 Income Statement Sales \ 85,000 Cost of goods sold 45,000 Gross margin \ 40,000 Operating expenses (15,000) Interest expense (5,000) Net income \ 20,000 Number of shares of common stock outstanding 6,000 Market price of common stock \ 20 Total dividends paid \ 9,000 Cash provided by operations \ 30,000 -What is the price-earnings ratio for Diane Company?

Match each definition that follows with the term (a-h) it defines. -the percentage analysis of the relationship of each component in a financial statement to a total within the statement

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

A company reports the following: Net income \ 350,000 Preferred dividends 50,000 Average stockhol ders' equity 1,000,000 Average common stockholders' equity 800,000 ​ Determine the (a) return on stockholders' equity, and (b) return on common stockholders' equity. Round your answer to one decimal place.

The following information was taken from Slater Company's balance sheet: Fixed assets (net) \ 1,250,000 Long-term liabilities 500,000 Total liabilities 672,000 Total stockholders' equity 1,680,000 ​ Determine the company's (a) ratio of fixed assets to long-term liabilities, and (b) ratio of liabilities to stockholders' equity. Round your answer to one decimal place.

Hsu Company reported the following on its income statement: Income before income taxes \ 420,000 Income tax expense \ 120,000 Net income \ 300,000 Interest expense was $80,000. Hsu Company's times interest earned ratio is

The following items were taken from the financial statements of Tilden, Inc., over a three-year period: ​ Item Year 3 Year 2 Year 1 Sales \ 360,000 \ 335,000 \ 290,000 Cost of goods sold 225,000 205,000 185,000 Gross profit \ 135,000 \ 130,000 \ 105,000 ​ Compute the following for each of the items listed. ​ (a) The amount and percentage change from Year 2 to Year 3. (b) The amount and percentage change from Year 1 to Year 2. Round percentages to one decimal place.

What information is generally included in the Management Discussion and Analysis (MD&A) section of a corporate annual report?

The excess of current assets over current liabilities is referred to as working capital.

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

The independent auditor's report

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

Match each ratio that follows to its use (items a-h). Items may be used more than once. -return on total assets

The following selected data were taken from the financial statements of the Winter Group for the three most recent years of operations: Dec. 31, Year 3 Dec. 31, Year 2 Dec. 31, Year 1 Total assets \ 3,000,000 \ 2,700,000 \ 2,400,000 Notes payable (10\% interest) 1,000,000 1,000,000 1,000,000 Common stock 400,000 400,000 400,000 Preferred \ 6 stock \ 100 par 200,000 200,000 200,000 Retained earnings 1,126,000 896,000 600,000 ​ The Year 3 net income was $242,000 and the Year 2 net income was $308,000. No dividends on common stock were declared during the 3 years. ​ (a) Determine the return on total assets, the return on stockholders' equity, and the return on common stockholders' equity for Years 2 and 3. Round to one decimal place. (b) What conclusion can be drawn from these data as to the company's profitability?