Exam 14: Financial Statement Analysis

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 $150,000 and interest expense is $20,000 for Year 2, what is the return on stockholders' equity for Year 2?

A 15% change in sales will result in a 15% change in net income.

In a company's annual report, the section called Management Discussion and Analysis provides critical information for interpreting the financial statements and assessing the future of the company.

The following items are reported on a company's balance sheet: Cash \ 400,000 Marketable securities 50,000 Accounts receivable 150,000 Inventory 200,000 Accounts payable 250,000 ​ Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal place.

If two companies have the same current ratio, their ability to pay short-term debt is the same.

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

In a common-sized income statement, 100% is the

Dividend yield on common stock is calculated as...

Assume the following sales data for a company: Current year \ 1,025,000 Preceding year 820,000 What is the percentage increase in sales from the preceding year to the current year?

Which of the following items should be classified as an unusual item on an income statement?

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

Which of the following measures a company's ability to pay its current liabilities?

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

In a common-sized income statement, each item is expressed as a percentage of net income.

All of the following are typically included in the management's discussion and analysis in annual reports except

Zeus Company reports the following for the current year: ​ *Net of any tax effect ​ (a) Prepare a partial income statement for Zeus Company beginning with income from continuing operations before income tax. (b) Calculate the earnings per common share for Zeus.

Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

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 are the dividends per common share for Diane Company?