Exam 14: Financial Statement Analysis

The denominator of the return on total assets ratio is the average total assets.

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

A firm selling food should have higher inventory turnover rate than a firm selling office furniture.

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.

Match each ratio that follows to its use (items a-h). Items may be used more than once. -earnings per share (EPS) on common stock

Condensed data taken from the ledger of St. Louis Company at December 31, for the current and preceding years, are as follows: Year 2 Year 1 Current assets \ 160,000 \ 130,000 Property, plant, and equipment 450,000 400,000 Intangible assets 20,700 30,000 Current liabilities 70,000 80,000 Long-term liabilities 210,000 250,000 Common stock 225,000 150,000 Retained earnings 125,700 80,000 ​ Prepare a comparative balance sheet, with horizontal analysis, for December 31, Year 2 and Year 1. (Round percents to one decimal point.)

For Garrison Corporation, the working capital at the end of the current year is $10,000 more than the working capital at the end of the preceding year, reported as follows: ​ Year 2 Year 1 Current assets: Cash, marketable securities, and receivables \ 80,000 \ 84,000 Inventories 120,000 66,000 Total current assets \ 200,000 \ 150,000 Current liabilities 100,000 60,000 Working capital \ 100,000 \ 90,000 ​ Has the current position of Garrison Corporation improved? Explain.

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

The percent of fixed assets to total assets is an example of

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

Balance sheet and income statement data indicate the following: Bonds payable, 10\% (due in two years) \ 1,000,000 Preferred 5\% stock, \ 100 par (no change during year) 300,000 Common stock, \ 50 par (no change during year) 2,000,000 Income before income tax for year 550,000 Income tax for year 80,000 Common dividends paid 50,000 Preferred dividends paid 15,000 Based on the data presented, what is the times interest earned ratio? (Round to one decimal point.)

Match each definition that follows with the term (a-h) it defines. -use debt to increase the return on an investment

Which of the following would appear as an unusual item on the income statement?

When the return on total assets is greater than the return on common stockholders' equity, the management of the company has effectively used leverage.

Cash and accounts receivable for Ashfall Co. are provided below: Current Year Prior Year Cash \ 62,400 \ 58,000 Accounts receivable (net) 42,000 50,000 ​ Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Round percentages to one decimal place.

A company reports the following: Net income \ 150,000 Preferred dividends \ 10,000 Shares of common stock outstanding 20,000 Market price per share of common stock \ 35 ​ Calculate the company's earnings per share on common stock.

Match each ratio that follows to its use (items a-h). Items may be used more than once. -dividends per share

Privett Company Accounts payable 30,000 Accounts receivable 35,000 Accrued liabilities 7,000 Cash 25,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 20,000 Property, plant, and equipment 400,000 Prepaid expenses 2,000 -Based on the data for Privett Company, what is the amount of working capital?

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 return on common stockholders' equity for Diane Company?

The percentage analysis of increases and decreases in individual items in comparative financial statements is called