Exam 22: Analyzing Financial Statements

If current assets were $100,000 in 20x7 and $88,000 in 20x8, what was the amount of increase or decrease? (round to nearest percent):

A vertical analysis of an income statement automatically provides the return on sales ratio and the gross profit ratio.

Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1)liquidity, (column 2)asset management, (column 3)debt, or (column 4)profitability. -

A type of analysis that compares each item with the same item in other periods is called horizontal analysis.

If Cara's Piano sales increased from $40,000 to $60,000 and its cost of goods sold increased from $20,000 to $40,000, then vertical analysis based on sales would show the following for cost of goods sold (rounded to the nearest percent):

Selected data for Stick's Design are given as of December 31, Year 1 and Year 2 (rounded to the nearest hundredth). Required: Compute the following: a. ________ Current ratio for Year 2. b. ________ Acid-test ratio for Year 2. c. ________ Accounts receivable turnover for Year 2. d. ________ Average collection period for Year 2. e. ________ Inventory turnover for Year 2.

With a beginning Accounts Receivable balance of $20,000, an ending balance of $26,000, and net credit sales of $408,000, compute accounts receivable turnover ratio.

A form of analysis in which each item on a report is shown as a percent of net sales is called a vertical analysis of the income statement.

The ratio that indicates the amount of assets that are financed by creditors is:

Scott Company had a current ratio of 2.76:1 in Year 1 and 2.57:1 in Year 2. This change in current ratio indicates:

What was the percentage of decrease in the Accounts Receivable account if the receivables were $80,000 in Year 1, and $60,000 in Year 2?

What is the inventory turnover if the beginning inventory was $60,000, cost of goods sold was $200,000, and ending inventory was $45,000?

If the average collection period has increased and credit terms remain the same, the company should put a greater emphasis on collections.

If beginning and ending inventories are $20,000 and $30,000, respectively, and cost of goods sold is $400,000, what is the inventory turnover ratio?

In a common-size income statement, selling expenses are 55%. This means that they are 55% of:

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1)liquidity, (column 2)asset management, (column 3)debt, or (column 4)profitability. -

Topiary's Unlimited has a cost of goods sold of $1,900,000. The beginning merchandise inventory was $125,000 and its ending merchandise inventory is $133,000. Topiary's merchandise inventory turnover ratio is:

The lower the times interest earned ratio, the more likely it is that interest payments will not be made.

When net income before taxes and interest is $52,000 and total assets equal $205,000, the rate of return on total assets is 3.9%.