Question 1

The following data was reported by JSB for a two-year period:  Assets:  Liabilities:  *Includes interest expense, $2,500 (pre-tax)
(a)Compute the following ratios for 20x12:
(1)Receivable turnover
(2)Inventory turnover
(3)Creditors' equity to total assets
(4)Acid test ratio
(5)Return on owners' equity
(6)Profit margin on sales
(7)Current ratio
(8)Return on total assets
(9)Owners' equity to total assets
(10)Financial leverage
(b)Briefly explain and interpret financial leverage.

Accepted Answer

The answer of The following data was reported by JSB...

Question 2

A primary reason for the analysis of financial statements is identification of major changes and to provide relative relationships among dollar amounts.

Accepted Answer

A) True 
 B)False

Question 3

A company's return on investment is affected by the market price of its shares.

Accepted Answer

A) True 
 B)False

Question 4

To apply a vertical analysis to the balance sheet, the base amount usually selected is:

Accepted Answer

A) either total liabilities or total shareholders' equity. 
B) total revenues. 
C) total assets. 
D) total liabilities. 
E) total shareholders' equity.

Question 5

What do solvency ratios measure?

Accepted Answer

The answer of What do solvency ratios measure?...

Question 6

All of the following are examples of regulatory decisions except:

Accepted Answer

A) impact of past regulatory decisions. 
B) need for rate or price increases. 
C) negotiating collective agreements. 
D) ability to withstand competition.

Question 7

Recording the payment (as distinguished from the declaration)of a cash dividend whose declaration was already recorded will:

Accepted Answer

A) decrease both the current ratio and working capital. 
B) have no effect on the current ratio or earnings per share. 
C) increase the current ratio but have no effect on working capital. 
D) increase both the current ratio and working capital. 
E) None of these choices are correct.

Question 8

What are multi-industry corporations and what problems, if any are associated with them (i.e.when analyzing their statements)?

Accepted Answer

The answer of What are multi-industry corporations and what problems,...

Question 9

The following information for JG Ltd.is available to you:  Required:
1.Calculate the accounts receivable turnover ratio
2.You determined that the industry average was 4.5 and that JG Ltd.had turnovers in previous years of 3.5, 3.8, 4.4, and 4.7.Based on this information, can you make any conclusions?

Accepted Answer

The answer of The following information for JG Ltd.is available...

Question 10

A qualified auditors' opinion is given when the financial statements present information in conformity with GAAP.

Accepted Answer

A) True 
 B)False

Question 11

There is a section in every annual report that detail the accounting policies used by a company.Explain why this is important to users and what some of the limitations are.

Accepted Answer

The answer of There is a section in every annual...

Question 12

Liquidity ratios essentially provide information about a company's ability to meet its short term obligations, while solvency ratios evaluate a company's long-term
going-concern potential.

Accepted Answer

A) True 
 B)False

Question 13

Examination of comparative financial statements does not enable financial statement users to better identify long-term trends.

Accepted Answer

A) True 
 B)False

Question 14

An improvement to a public company's credit rating where the fair value option is used will adversely affect the company's solvency ratios.

Accepted Answer

A) True 
 B)False

Question 15

Common-size analysis is a(n):

Accepted Answer

A) Historical ratio. 
B) Longitudinal comparison. 
C) Cross-sectional comparison. 
D) Industrial ratio.

Question 16

Upon reading the notes to the financial statements of JMR Ltd., you notice that the policies they have chosen tend to recognize revenue early in the earnings cycle while deferring costs to later periods.This approach leads you to believe that JMR Ltd.is employing a(n):

Accepted Answer

A) Profit maximization strategy. 
B) Income tax minimization strategy. 
C) Income tax maximization strategy. 
D) Smoothing strategy.

Question 17

Earnings per share is computed by dividing the number of shares issued into the net income for the period.

Accepted Answer

A) True 
 B)False

Question 18

LMN reported the following 2014 data in 000's:  LMN's average age of the receivables was (in days): (Assume 360 days in a year)

Accepted Answer

A) 61 days. 
B) 91 days. 
C) 115 days. 
D) 37 days. 
E) None of these choices are correct.

Question 19

A company with sales terms of n/30 would prefer a receivable turnover of:

Accepted Answer

A) 5) 
B) 20. 
C) 10. 
D) 2) 
E) All of these choices are equally desirable if sales terms are n/30.

Question 20

What are the possible decisions that can be made with the use of financial analysis?

Accepted Answer

The answer of What are the possible decisions that can...

Exam 22: Financial Statement Analysis

A primary reason for the analysis of financial statements is identification of major changes and to provide relative relationships among dollar amounts.

A company's return on investment is affected by the market price of its shares.

To apply a vertical analysis to the balance sheet, the base amount usually selected is:

What do solvency ratios measure?

All of the following are examples of regulatory decisions except:

Recording the payment (as distinguished from the declaration) of a cash dividend whose declaration was already recorded will:

What are multi-industry corporations and what problems, if any are associated with them (i.e.when analyzing their statements)?

The following information for JG Ltd.is available to you: Required: 1.Calculate the accounts receivable turnover ratio 2.You determined that the industry average was 4.5 and that JG Ltd.had turnovers in previous years of 3.5, 3.8, 4.4, and 4.7.Based on this information, can you make any conclusions?

A qualified auditors' opinion is given when the financial statements present information in conformity with GAAP.

There is a section in every annual report that detail the accounting policies used by a company.Explain why this is important to users and what some of the limitations are.

Liquidity ratios essentially provide information about a company's ability to meet its short term obligations, while solvency ratios evaluate a company's long-term going-concern potential.

Examination of comparative financial statements does not enable financial statement users to better identify long-term trends.

An improvement to a public company's credit rating where the fair value option is used will adversely affect the company's solvency ratios.

Common-size analysis is a(n) :

Upon reading the notes to the financial statements of JMR Ltd., you notice that the policies they have chosen tend to recognize revenue early in the earnings cycle while deferring costs to later periods.This approach leads you to believe that JMR Ltd.is employing a(n) :

Earnings per share is computed by dividing the number of shares issued into the net income for the period.

LMN reported the following 2014 data in 000's: LMN's average age of the receivables was (in days) : (Assume 360 days in a year)

A company with sales terms of n/30 would prefer a receivable turnover of:

What are the possible decisions that can be made with the use of financial analysis?