Exam 13: Analysis of Financial Statements

A business segment is a part of a company that is separated by its (1) ________ or (2) ________.

Three of the most common tools of financial analysis are:

A company's board of directors analyzes financial statements to improve operating performance and evaluate the performance of individual entry-level employees.

Refer to the following selected financial information from WorkFit Corporation. Compute the company's acid-test ratio. Cash \ 2,250 Short-term investments 60,000 Accounts receivable, net 79,500 Merchandise inventory 115,000 Prepaid expenses 9,700 Accounts payable 111,400

Comparative calendar year financial data for a company are shown below. Calculate the following ratios for Year 2: (a) return on total assets (b) return on common stockholders' equity.

How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:

Profitability is the ability to generate future revenues and meet long-term obligations.

All of the following are true of a financial statement analysis report, except:

Which of the following items is typically not included as a separate item after normal revenues and expenses?

Use the following selected information from Whitman Corp. to determine the Year 1 and Year 2 common size percentages for operating expenses using Net sales as the base. Year 2 Year 1 Net sales \ 276,200 \ 231,400 Cost of goods sold 151,900 129,590 Operating expenses 55,240 53,240 Net earnings 27,820 19,820

A component of operating efficiency and profitability, calculated by expressing net income as a percent of net sales, is the:

Financial reporting includes not only general purpose financial statements, but also information from SEC filings, press releases, shareholders' meetings, forecasts, management letters, and auditor's reports.

Selected current year end financial information for a company is presented below. Calculate the following company ratios: (a) Profit margin. (b) Total asset turnover. (c) Return on total assets. (d) Return on common stockholders' equity (assume the company has no preferred stock). Net income $ 325,000 Net sales 4,700,000 Total liabilities, beginning-year 550,000 Total liabilities, end-of-year 530,000 Total stockholders' equity, beginning-year. 760,000 Total stockholders' equity, end-of-year 745,000

Horizontal analysis is used to reveal patterns in data covering successive periods.

Refer to the following selected financial information from Gomez Electronics. Compute the company's return on total assets for Year 2. Year 2 Year 1 Net sales \ 478,500 \ 426,250 Cost of goods sold 276,300 250,120 Interest expense 9,700 10,700 Net income before tax 67,250 52,680 Net income after tax 46,050 39,900 Total assets 317,100 288,000 Total liabilities 181,400 167,300 Total equity 135,700 120,700

A corporation reports the following year-end balance sheet data. The company's debt ratio equals: Cash \ 40,000 Current liabilities \ 5,000 Accounts receivable 55,000 Long-term liabilities 35,000 Inventory 60,000 Common stock 100,000 Equipment 145,000 Retained earnings 90,000 Total assets \ 300,000 Total liabilities and equity \ 300,000

Refer to the following selected financial information from Texas Electronics. Compute the company's working capital for Year 2. Year 2 Year 1 Cash \ 37,500 \ 36,850 Short-term investments 90,000 90,000 Accounts receivable, net 85,500 86,250 Merchandise inventory 121,000 117,000 Prepaid expenses 12,100 13,500 Plant assets 388,000 392,000 Accounts payable 113,400 111,750 Net sales 711,000 706,000 Cost of goods sold 390,000 385,500

All of the following statements regarding a business segment are true except:

Efficiency refers to how productive a company is in using its assets, and is usually measured relative to how much revenue is generated from a certain level of assets.