Exam 14: Financial Statement Analysis

Selected data from the Carmen Company at year end are presented below: Calculate: a ratio of sales to assets; b rate earned on total assets; c rate earned on common stockholders' equity and d earnings per share on common stock.Assume the company had no preferred stock or interest expense.Round percentage values to one decimal place and dollar values to zero decimal place.

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

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

The balance sheet data of Randolph Company for two recent years appears below: a Using horizontal analysis, show the percentage change for each balance sheet item using Year 1 as a base year. b Using vertical analysis, prepare a comparative balance sheet. Round percentages to one decimal place.

An extraordinary item must be either unusual in nature or infrequent in occurrence.

A loss on disposal of a segment would be reported in the income statement as an

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

A company reported the following: Calculate the company's price­earnings ratio.Round your answer to one decimal place.

Which of the following is required by the Sarbanes-Oxley Act?

A company reports the following: Income before income tax $600,000 Interest expense 150,000 Determine the number of times interest charges are earned.Round your answer to one decimal place.

The following information has been condensed from the December 31 balance sheets of Gabriel Co.: a Determine the ratio of fixed assets to long-term liabilities for each year. b Determine the ratio of liabilities to stockholders' equity for each year. c Comment on the year-to-year changes for both ratios.Round your answers to two decimal places.

The purpose of an audit is to

The following data are taken from the balance sheet at the end of the current year. Determine the a working capital, b current ratio, and c quick ratio.Round ratios to the nearest tenth.

Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

Match each definition that follows with the term a-h it defines. -occurs when a company abandons a segment

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

Based on the above data, what is the quick ratio, rounded to one decimal point?

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is