Exam 16: Financial Statement Analysis

Interim financial statements are not subject to a full audit by an independent auditor.

Liquidity is the ability to earn a satisfactory net income.

If dividends declared per share during 20x4 (the base year),20x5,and 20x6 are $4.80,$3.60,and $4.32,respectively,the index numbers assigned to 20x5 and 20x6,respectively,are

Briefly explain a "big bath" including when it occurs and why it occurs.

In a common-size financial statement,which of the following is given a designation of 100 percent?

Cash flows to sales and cash flows to assets are measured in terms of

Determining the percentage change in an item from one year to the next is a type of horizontal analysis.

Which of the following describes the return on assets ratio?

Accounting methods may be a source of incomparability among companies.

The use of rule-of-thumb measures is superior to comparison of financial measures or ratios of the same company over a period of time.

Vertical analysis will reveal the percentage of net sales consumed by salaries expense.

A limitation of using industry norms in financial performance evaluation is that some companies in the same industry may not be strictly comparable.

Use the following information to calculate the ratios requested below.Round answers to two decimal places.Show your work.

Trend analysis requires the establishment of a base year for comparison purposes.

Lois Kent has owned and managed the operations of a small chain of sporting goods stores for the past two years.She has asked her administrative assistant to provide her with some annual reports of other companies that sell sporting goods as well as some published reports showing norms for the sporting goods industry so that Lois can compare the financial ratios of her company with those of other companies that sell sporting goods.Discuss the limitations of using comparisons with other companies and industry norms,which Lois needs to remember.

In a common-size balance sheet for a retail store,the 100 percent amount is for

For 2010,Black & White Corporation had average total assets of $300,000,net sales of $250,000,net income of $20,000,net cash flows from operating activities of $30,000,dividend payments of $15,000,purchases of plant assets of $70,000,and sales of plant assets of $30,000.Using this information,compute (a)cash flow yield,(b)cash flows to sales,(c)cash flows to assets,and (d)free cash flow.Round amounts to one decimal place.

The financing period

If Year 1 equals $2,800,Year 2 equals $3,108,and Year 3 equals $3,668,the index number to be assigned for Year 3 in trend analysis,assuming that Year 1 is the base year,is

If sales for 20x4 (the base year),20x5,and 20x6 are $40,000,$31,200,and $49,200,respectively,the index numbers assigned to 20x5 and 20x6,respectively,are