Exam 17: Financial Statement Analysis

What is a common-size statement? Why are these statements useful?

Danby,Inc.provides the following data from its income statement for 2018: Net Sales \ 540,000 Cost of Goods Sold \ 190,000 Gross Profit \ 350,000 Calculate the gross profit percentage.(Round your answer to two decimal places.)

Regarding the profit margin ratio,which of the following statements is incorrect?

If inventory turnover is too slow,a company may be unable to sell goods or it may be understating merchandise inventory.

Unexpected or inconsistent movements among sales,merchandise inventory,and receivables reflect normal market conditions and do not pose red flags in financial statements.

The financial statements of Island Furniture Company include the following items: 2019 2018 Cash \ 45,500 \ 50,000 Short-term Investments 26,000 15,500 Net Accounts Receivable 102,000 98,000 Merchandise Inventory 166,000 151,000 Total Assets 527,000 544,000 Total Current Liabilities 302,000 295,000 Long-term Note Payable 64,000 50,000 What is the 2019 acid-test ratio? (Round your answer to two decimal places.)

Prepare a vertical analysis for the balance sheet data given below.(Round to two decimal places.) Petals, Inc. Balance Sheet December 31, 2019 Assets Current Assets: Cash and Cash Equivalents \ 10,000 Accounts Receivable, Net 15,600 Merchandise Inventory Total Cument Assets 63,600 Long-term Invetments 15,000 Property, Plant, and Equipment, Net \ 195,000 Total Assets \ 273,600 Liabilities Current Liabilities: Accounts Payable \ 8,500 Notes Payable Total Current Liabilities 9,900 Long-term Liabilities Total Liabilities 63,900 Stockholders' Equity Common Stcck 161,000 Retained Earnings Total Stockholders' Equity Total Liabilities and Stockholders' Equity \ 273,600

Investors and creditors can evaluate a company by examining only one year of data.

Beary,Inc.provides the following historical data: 2019 2018 2017 2016 2015 2014 Net sales \ 4,970 \ 4,500 \ 3,980 \ 3,270 \ 4,750 \ 4,400 Prepare the trend analysis report.Use 2014 as the base year,and round answers to the nearest percent.

Which of the following best describes horizontal analysis?

The following is a summary of information presented on the financial statements of a company on December 31,2019. Account Net Sales Revenue \ 605,000 \ 504,000 Cost of Goods Sold Gross Profit \ 148,000 \ 102,000 Selling Expenses Net Income Before Income Tax Expense \ 98,000 \ 49,000 Income Tax Expense Net Income \ 61,000 \ 29,000 With respect to net income,a horizontal analysis reveals ________.(Round your answer to two decimal places.)

The financial statements of Carrier Office Furniture Company include the following items: 2019 2018 Cash \ 49,500 \ 45,000 Short-term Investments 29,000 10,000 Net Accounts Receivable 97,000 103,000 Merchandise Inventory 162,000 150,000 Total Assets 534,000 550,000 Total Current Liabilities 271,000 293,000 Long-term Note Payable 57,000 52,000 What is working capital for 2019?

Shelcal,Inc.provides the following data for the year 2019: Net Sales Revenue 437,690 Cost of Goods Sold 255,000 The cost of goods sold as a percentage of net sales revenue is ________.(Round your answer to two decimal places.)

An external auditor is responsible for assessing the effectiveness of a company's internal controls.

The rate of return on total assets measures a company's success in using its assets to earn a profit.

Benchmarking is the comparison of a company's current year results with a previous year's performance.

Days' sales in inventory measures how quickly a company can collect its receivables.

In a vertical analysis of the income statement,each line item is shown as a percentage of net sales revenue.

Use the balance sheet of Chicago,Inc.to calculate the current ratio for 2019 and 2018 Assets $\text {Chicago, Inc.}$ $\text {Comparative Balance Sheet}$ $\text {December 31,2019 and 2018}$ 2019 2018 Total Cument Assets \ 200,000 \ 100,000 Property, Plant, and Equipment, Net 550,000 500,000 Other Assets 50,000 50,000 Total Assets \ 800,000 \ 650,000 Liabilities Total Current Liabilities \ 150,000 \ 100,000 Long-term Debt Total Liabilities Stockholders' Equity Total Stockholders' Equity Total Liabilities and Stockholders' Equity \ 600,000 \ 650,000

Which of the following is NOT a decision tool based on working capital?