Question 1

The building blocks of financial statement analysis include

Accepted Answer

A) Liquidity and efficiency 
B) Solvency 
C) Profitability 
D) Market 
E) All of these

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Dividend yield is the annual cash dividends per common share relative to the share's market price.

Accepted Answer

A) True 
 B)False

Question 4

The purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency or effectiveness in providing products or services.

Accepted Answer

A) True 
 B)False

Question 5

CampUs Ltd has profit of $500,000.It has 125,000 shares outstanding and a market price per share of $115.The price-earnings ratio is

Accepted Answer

A) 28.8 
B) 14.7 
C) 92.0 
D) 13.5 
E) 8.0

Question 6

The merchandise turnover ratio

Accepted Answer

A) Is cost of goods sold divided by ending inventory 
B) Is calculated by dividing merchandise inventory by cost of goods sold 
C) Is ending inventory divided by cost of goods sold 
D) Is calculated by dividing cost of goods sold by average merchandise inventory 
E) Is cost of goods sold divided by ending inventory times 365

Question 7

Analysis of a single financial item is important but is of limited value.

Accepted Answer

A) True 
 B)False

Question 8

In periods of low income,bonds can increase return on equity because of less equity investment.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) True 
 B)False

Question 10

When a company can leverage funds at a rate that is less than the after-tax return on assets,the return on equity will exceed the return on assets.

Accepted Answer

A) True 
 B)False

Question 11

The gross margin ratio is gross profit divided by net sales.

Accepted Answer

A) True 
 B)False

Question 12

Lotsky Power Tools Corp had profit of $1,478,000.It paid $5,000 in preferred dividends.Lotsky had 200,000 common shares issued,and 8,000 treasury shares.The market price of Lotsky's shares was $38.25.Calculate the price-earnings ratio.

Accepted Answer

The answer of Lotsky Power Tools Corp had profit of...

Question 13

Given the following financial data for Cliniva Corp,calculate the ratios listed below the data.
 Cliniva Corp.
Partial Income statement
Far the year ended December 31, 2021
$\begin{array}{|l|r|}
\hline \text { Sales (all on credit) } & \$ 650,000 \
\hline \text { Cost of goods sold } & 225,400 \
\hline \text { Income before taxes } & \$ 424,600 \
\hline \text { Income tax expense } & 186,000 \
\hline \text { Profit } & \$ 238,600\\hline 
\end{array}$ Cliniva Corp. 
Comparative Balance Sheet 
December 31,
$\begin{array}{|l|r|r|}
\hline & \mathbf{2 0 2 1} & \mathbf{2 0 2 0} \
\hline \text { Cash } & \$ 14,600 & \$ 18,000 \
\hline \text { Accounts Receivable (net) } & 56,000 & 58,000 \
\hline \text { Merchandise inventory } & 22,800 & 21,400 \\hline \text { Property, plant and equipment (net) } & 185,000&145,000 \
\hline \text { Total Assets } & \$ 278,400&\$242,400 \\hline \text { Current liabilities } & \$ 83,000 \
\hline \text { Long-term notes payable } & 89,000 \
\hline
\end{array}$ (A)Current ratio.(B)Acid-test ratio.(C)Days' sales uncollected.(D)Merchandise turnover.

Accepted Answer

The answer of Given the following financial data for Cliniva...

Question 14

If the times interest earned ratio

Accepted Answer

A) Increases,risk increases 
B) Is under 1.5,risk decreases 
C) Is over 1.5,risk increases 
D) Increases,risk decreases 
E) Increases and/or is under 1.5,risk decreases

Question 15

The following information is for Z-Mart and its competition Diablo.
  Instructions: (1)Calculate the dollar amount of gross margin and the gross margin ratio for each company for both years.(2)Which company had the more favourable ratio each year? (3)Which company had the more favourable trend over the 2-year period?

Accepted Answer

The answer of The following information is for Z-Mart and...

Question 16

Profit margin is

Accepted Answer

A) Revenues divided by sales 
B) Revenues divided by assets 
C) Profit divided by sales 
D) Profit divided by assets 
E) Sales divided by assets

Question 17

Brown Company has profit of $125,000.Its net sales were $1,739,000 and its average total assets were $2,750,000.Its total asset turnover was 4.5%.

Accepted Answer

A) True 
 B)False

Question 18

Intercompany analysis is based on internal comparisons.

Accepted Answer

A) True 
 B)False

Question 19

CrossSports had interest expense of $12,000 and its income before interest and income taxes was $28,000.Its times interest earned ratio

Accepted Answer

A) Is 2.3 
B) Is 0.3 
C) Is acceptable 
D) Is both 2.3 and acceptable 
E) Is both 0.3 and acceptable

Question 20

The gross margin ratio

Accepted Answer

A) Measures a merchandising firm's ability to earn a profit from the sale of inventory 
B) Is also called the profit margin ratio 
C) Is also called the gross profit ratio 
D) Measures a merchandising firm's ability to earn a profit from the sale of inventory and is also called profit margin ratio 
E) Is also called the gross profit ratio and measures a merchandising firm's ability to earn a profit from the sale of inventory

Exam 9: Analyzing Financial Statements

The building blocks of financial statement analysis include

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

Dividend yield is the annual cash dividends per common share relative to the share's market price.

The purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency or effectiveness in providing products or services.

CampUs Ltd has profit of $500,000.It has 125,000 shares outstanding and a market price per share of $115.The price-earnings ratio is

The merchandise turnover ratio

Analysis of a single financial item is important but is of limited value.

In periods of low income,bonds can increase return on equity because of less equity investment.

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

When a company can leverage funds at a rate that is less than the after-tax return on assets,the return on equity will exceed the return on assets.

The gross margin ratio is gross profit divided by net sales.

Lotsky Power Tools Corp had profit of $1,478,000.It paid $5,000 in preferred dividends.Lotsky had 200,000 common shares issued,and 8,000 treasury shares.The market price of Lotsky's shares was $38.25.Calculate the price-earnings ratio.

If the times interest earned ratio

Profit margin is

Brown Company has profit of $125,000.Its net sales were $1,739,000 and its average total assets were $2,750,000.Its total asset turnover was 4.5%.

Intercompany analysis is based on internal comparisons.

CrossSports had interest expense of $12,000 and its income before interest and income taxes was $28,000.Its times interest earned ratio

The gross margin ratio