Question 1

The following current year information is available from a manufacturing company:
 $$\begin{array} {| l | c | } 
\hline\text { Sales } & \$ 740,000 \
\hline \text { Gross profit on sales } & 276,000 \
\hline \text { Operating income } & 64,000 \
\hline \text { Income before taxes } & 44,000 \
\hline \text { Net income } & 33,600 \
\hline \text { Accounts Receivable, beginning-year } & 58,000 \
\hline \text { Accounts Receivable, end-of-year } & 72,000 \
\hline
\end{array}$$
 Calculate the company's accounts receivable turnover and its days' sales uncollected.

Accepted Answer

The answer of The following current year information is available...

Question 2

Describe the purpose of horizontal financial statement analysis and how it is applied.

Accepted Answer

The answer of Describe the purpose of horizontal financial statement...

Question 3

Information from a manufacturing company's current year income statement follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned.
 $$\begin{array} { | l | l | } 
\hline \text { Sales } & \$ 850,000 \
\hline \text { Cost of goods sold } & 455,000 \
\hline \text { Gross profit } & \$ 395,000 \
\hline \text { Operating expenses } & 260,000 \
\hline \text { Operating income } & \$ 135,000 \
\hline \text { Interest expense } & 32,000 \
\hline \text { Income before taxes } & \$ 103,000 \
\hline \text { Income taxes expense } & 12,400 \
\hline \text { Net income } & \$ 90,600 \
\hline
\end{array}$$

Accepted Answer

The answer of Information from a manufacturing company's current year...

Question 4

________ ratios include the price-earnings ratio and dividend yield.

Accepted Answer

The answer of ________ ratios include the price-earnings ratio and...

Question 5

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

Accepted Answer

A)  .0785%. 
B)  7.85%. 
C)  12.73%. 
D)  1273%. 
E)  7850%.

Question 6

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750. The Days' sales in inventory (rounded to whole days) is:

Accepted Answer

A)  18 days. 
B)  418 days. 
C)  10 days. 
D)  56 days. 
E)  20 days.

Question 7

Internal users of accounting information make the strategic and operating decisions of a company.

Accepted Answer

A) True 
 B)False

Question 8

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

Accepted Answer

A)  −104% 
B)  100% 
C)  −4% 
D)  96% 
E)  4.2%

Question 9

The return on total assets can be calculated as profit margin times total asset turnover.

Accepted Answer

A) True 
 B)False

Question 10

Express the following income statement information in common-size percentages (round to nearest whole percent). Comment on the results.
 $\begin{array}{c}
 \text {Haans Corp.}\
 \text {Comparative Income Statements}\
 \text {For Years Ended December 31,2018 and 2017}\
\begin{array}{|l|}
\hline\
\hline \text {Sales}\
\hline \text {Cost of goods sold}\
\hline \text {Grossprofit}\
\hline \text {Selling expenses}\
\hline \text {Administrative expenses}\
\hline \text {Net income}\
\hline
\end{array}
\begin{array}{r|}
\hline2018\
\hline\$1,2000,000\
\hline\underline{804,000}\
\hline\$\quad396,000\
\hline132,000\
\hline\underline{180,000}\
\hline\underline{\$\quad84,000}\
\hline
\end{array}
\begin{array}{r|}
\hline2017\
\hline\$ 1,000,000 \
\hline 650,000 \
\hline\$ \quad 350,000 \
\hline 120,000 \
\hline \underline{150,000} \
\hline\underline{\$ \quad 80000}\
\hline 
\end{array}
\end{array}$

Accepted Answer

The answer of Express the following income statement information in...

Question 11

Ratios may be expressed as (1) ________, (2) ________, or (3) ________.

Accepted Answer

The answer of Ratios may be expressed as (1) ________,...

Question 12

A company's calendar-year financial data are shown below. The company had total assets of $339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of $19,500 were paid during the year. Calculate the following ratios for the company:
(a) debt ratio
(b) equity ratio
(c) debt-to-equity ratio
(d) times interest earned
(e) total asset turnover
 $\begin{array}{c}
\begin{array}{|l|}
\hline \text {Net sales}\
\hline \text {Cost of goods sold}\ 
\hline \text {Grossprofit}\
\hline \text {Operating expenses}\ 
\hline \text {Operating income}\
\hline \text {Interest expense}\ 
\hline \text {Income before taxes}\
\hline \text {Income taxes}\
\hline \text {Net income}\ 
\hline \
\hline \
\hline \
\hline \text {Cash}\ 
\hline \text {Accounts receivable (net)}\
\hline \text {Inventory}\
\hline \text {Plant assets (net)}\
\hline \text {Total assets}\
\hline \
\hline \text {Current liabilities}\
\hline \text {Long-term notes payable}\
\hline \text {Common stock, $ \$ 5 $ par value}\
\hline \text {Retained earnings}\
\hline \text {Total liabilities and equity}\
\hline 
\end{array}
\begin{array}{l|}
\hline\$ 650,000 \
\hline422,500 \
\hline \$ 227,500\
\hline 140,500 \
\hline \$ \quad 87,000 \
\hline 9,100 \
\hline \$ \quad 77,900 \
\hline 23,400 \
\hline \$ \quad 54,500 \
\hline\ 
\hline \text {Ending}\
\hline \text {Balances}\
\hline\$ 19,500\
\hline65,000\
\hline71,500\
\hline\underline{195,000} \
\hline\underline{\$ 351,000}\
\
\hline 74,100  \
\hline97,500\
\hline65,000 \
\hline114,400\
\hline\underline{\$ 351,000}\
\hline 
\end{array}
\end{array}$

Accepted Answer

The answer of A company's calendar-year financial data are shown...

Question 13

Refer to the following selected financial information from McCormik, LLC. Compute the company's accounts receivable turnover for Year 2. $$\begin{array} { | l | r | r | } 
\hline & \text { Year 2 } &  { \text { Year 1 } } \
\hline \text { Cash } & \$ 37,500 & 36,850 \
\hline \text { Short-term investments } & 90,000 & 90,000 \
\hline \text { Accounts receivable, net } & 85,500 & 86,250 \
\hline \text { Merchandise inventory } & 121,000 & 117,000 \
\hline \text { Prepaid expenses } & 12,100 & 13,500 \
\hline \text { Plant assets } & 388,000 & 392,000 \
\text { Accounts payable } & 113,400 & 111.750 \
\hline \text { Net sales } & 711,000 & 706,00 \
\hline \text { Cost of goods sold } & 390,000 & 385,500 \
\hline
\end{array}$$

Accepted Answer

A)  8.62. 
B)  8.28. 
C)  8.94. 
D)  5.78. 
E)  7.90.

Question 14

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Accepted Answer

A) True 
 B)False

Question 15

Financial reporting refers to:

Accepted Answer

A)  The application of analytical tools to general-purpose financial statements. 
B)  The communication of financial information useful for decision making. 
C)  General-purpose financial statements only. 
D)  Ratio analysis only. 
E)  Profitability.

Question 16

Use the financial data shown below to calculate the following ratios for the current year:
(a) Current ratio.
(b) Acid-test ratio.
(c) Accounts receivable turnover.
(d) Days' sales uncollected.
(e) Inventory turnover.
(f) Days' sales in inventory.
Income statement data
Sales (all on credit)………………………………… $650,000
Cost of goods sold…………………………………. 425,000
Income before taxes……………………………….. 78,000
Net income………………………………………… 54,600
 $$\begin{array} { | l | l | l | } 
\hline & \begin{array} { l } 
\text { Ending } \
\text { Balances }
\end{array} & \begin{array} { l } 
\text { Beginning } \
\text { Balances }
\end{array} \
\hline \text { Cash } & \$ 19,500 & \$ 15,000 \
\hline \text { Accounts receivable (net) } & 65,000 & 60,000 \
\hline \text { Inventory } & 71,500 & 64,500 \
\hline \text { Plant and equipment (net) } & 195,000 & 183,900 \
\hline \text { Total assets } & \underline{\$ 351,000} &\underline{ \$ 323,400 }\
\hline \text { Current liabilities } & \$ 62,400 & \$ 52,700 \
\hline \text { Long-term notes payable } & 97,500 & 100,000 \
\hline
\end{array}$$

Accepted Answer

The answer of Use the financial data shown below to...

Question 17

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

Accepted Answer

A) True 
 B)False

Question 18

External users of accounting information manage and operate the company.

Accepted Answer

A) True 
 B)False

Question 19

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Accepted Answer

The answer of A company reported net income of $78,000...

Question 20

Carducci Corporation reported Net sales of $3.6 million and average Total assets of $1.1 million. The Total asset turnover is:

Accepted Answer

A)  0.31 times. 
B)  3.27 times. 
C)  4.30 times. 
D)  2.27 times. 
E)  0.77 times.

Exam 13: Analysis of Financial Statements

Describe the purpose of horizontal financial statement analysis and how it is applied.

________ ratios include the price-earnings ratio and dividend yield.

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750. The Days' sales in inventory (rounded to whole days) is:

Internal users of accounting information make the strategic and operating decisions of a company.

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

The return on total assets can be calculated as profit margin times total asset turnover.

Ratios may be expressed as (1) , (2) , or (3) .

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Financial reporting refers to:

One purpose of financial statement analysis for internal users is to provide strategic information to improve company efficiency and effectiveness in providing products and services.

External users of accounting information manage and operate the company.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's stock was $49.40. What is the company's year-end price-earnings ratio?

Carducci Corporation reported Net sales of $3.6 million and average Total assets of $1.1 million. The Total asset turnover is: