Exam 13: Financial Statement Analysis

Knife Corp. Use the selected data presented below from the financial statements of Knife Corp.for 2018 and 2017 to answer the questions that follow. ​ 2018 2017 Net income \ 110,000 \ 123,000 Cash dividends paid on preferred stock \ 12,000 \ 15,000 Cash dividends paid on common stock \ 42,000 \ 38,000 Weighted average number of common shares outstanding 105,000 \ 5,000 Market price per share of common stock at the end of the year \ 16.00 \ 13.00 ​ -Refer to the data for Knife Corp. ​ Required (A)Calculate the dividend yield ratio for 2018 for Knife.Explain. (B)What factors could have caused the change in the market value of Knife's stock from 2017 to 2018? Explain.

Mother Nature Supplies Following are selected data from the financial statements of Mother Nature Supplies: ​ 2018 2017 Accounts receivable \ 60,000 \ 38,000 Merchandise inventory 12,000 16,000 Total assets 450,000 380,000 Net sales 380,000 270,000 Cost of goods sold 160,000 210,000 ​ -Refer to the data for Mother Nature Supplies. Which of the following would not result from a vertical analysis of its balance sheet?

The definition of a conglomerate is a company that operates in one industry and uses different inventory valuation techniques.

Apple Company had terms of net 60 days for customers.The number of days' sales in accounts receivable for Apple was 42 days.Apple is efficient in the collection of its receivables.

What do profitability ratios measure? Explain.

Which of the following generally indicates a positive change?

Westmoreland Company Following are selected data from Westmoreland Company's financial statements. ​ 2018 2017 Current liabilities \ 230,000 \ 160,000 Long-term debt 120,000 320,000 Stockhol ders' equity 420,000 540,000 Cash payments for additions to plant and equipment 45,000 32,000 Net cash flow from operating activities 80,000 51,000 Interest and principal payments 12,000 8,000 Net operating cash flows before interest and taxes 68,000 43,000 Net income 90,000 72,000 Interest expense 8,500 11,500 Income taxes 16,000 14,500 Dividends paid 15,000 30,000 ​ -Refer to the Westmoreland Company data. The company's times interest earned ratio for 2018

Because of its relationship to dividends and market price,which ratio is important to investors?

Which of the following profitability ratios is most useful in indicating the "quality" of a company's earnings?

Earnings per share is an indication of how much

Which of the following is considered a profitability ratio?

Which profitability ratio requires the use of earnings per share and the current market price?

A financial analyst is comparing two companies.Which of the following would cause major problems in the evaluation process?

Which of the following statements is generally considered desirable?

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay,while inventory need only be sold in a retail store.

Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question. ​ 2018 2017 Cash \ 22,000 \ 14,000 Accounts receivable 42,000 16,000 Merchandise inventory 22,000 83,000 Prepaid expenses 23,000 18,000 Total current assets \ 109,000 \ 131,000 Total current liabilities \ 65,000 \ 72,000 Net credit sales 221,000 326,000 Cost of goods sold 168,000 299,000 Net cash flow from operating activities 16,000 29,000 ​ -Refer to the data for Pinecrest Company. Competitors in Pinecrest Company's industry have an average inventory turnover of 20.8 times.Its inventory turnover for 2018

Seashell Company is considered "very liquid" for the year ended December 31,2017.This means that Seashell

Service-oriented companies have different needs than product-oriented companies when analyzing financial statements. ​ Required Why is this true? Give an example of a financial ratio that is meaningless to a service business.

Which of the following is an example of liquidity analysis?

​Starship Inc.'s gross profit ratio decreased from 36.5% in 2017 to 28.6% in 2018.What is the trend in this change?