Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Express the following balance sheets for Safety Company in common-size percentages.
 $\begin{array}{c}
 \text {Safety Company}\
 \text {Balance Sheets}\
 \text {December 31,2017 and 2016}\
\begin{array}{|l|r|r|}
\hline&2017&2016\
\hline \text { Assets } & & \
\hline \text { Cash } & \$ 43,000 & \$ 22,000 \
\hline \text { Accounts receivable } & 38,000 & 42,000 \
\hline \text { Merchandise inventory } & 61,000 & 52,000 \
\hline \text { Prepaid insurance } & 6,000 & 9,000 \
\hline \text { Long-term investments } & 49,000 & 20,000 \
\hline \text { Plant assets (net) } & 218,000 & 218,000 \
\hline \text { Total assets } & \$ 415,000 & \$ 363,000 \
\hline\
\hline \text { Liabilities and Equity } & & \
\hline \text { Current liabilities } & \$ 62,000 & \$ \quad 75,000 \
\hline \text { Long-term liabilities } & 45,000 & 36,000 \
\hline \text { Common stock } & 150,000 & 150,000 \
\hline \text { Retained earnings } & 158,000 & 102,000 \
\hline \text { Total liabilities and equity } & \$ 415,000 & \$ 363,000 \
\hline 
\end{array}
\end{array}$

Accepted Answer

The answer of Express the following balance sheets for Safety...

Question 3

Zhang Company reported Cost of goods sold of $835,000,beginning Inventory of $37,200 and ending Inventory of $46,300.The average Inventory amount is:

Accepted Answer

A)  $37,200. 
B)  $46,300. 
C)  $83,500. 
D)  $41,750. 
E)  $9,100.

Question 4

$$\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 42,250 \
\hline \text { Short-term investments } & 60,000 \
\hline \text { Accounts receivable, net } & 79,500 \
\hline \text { Merchandise inventory } & 115,00 \
\hline \text { Prepaid expenses } & 9,700 \
\hline \text { Accounts payable } & 111,400 \
\hline
\end{array}$$
-Refer to the following selected financial information from Dodge Company.Compute the company's acid-test ratio.

Accepted Answer

A)  2.75. 
B)  2.66. 
C)  0.92. 
D)  1.12. 
E)  1.63.

Question 5

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

Accepted Answer

A)  3.1. 
B)  22.0. 
C)  93.8. 
D)  32.0. 
E)  3.3.

Question 6

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 7

The measurement of key relationships between financial statement items is known as ________.

Accepted Answer

The answer of The measurement of key relationships between financial...

Question 8

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)profit margin ratio
(b)gross margin ratio
(c)return on total assets
(d)return on common stockholders' equity
(e)book value per common share
(f)basic earnings per share
(g)price earnings ratio
(h)dividend yield.

Accepted Answer

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

Question 9

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once.
-Debt Ratio

Accepted Answer

A) Market Prospects 
B) Liquidity and Efficiency 
C) Solvency 
D) Profitability

Question 10

Gains and losses that are neither unusual nor infrequent are reported as:

Accepted Answer

A)  Part of continuing operations in after-tax dollars. 
B)  A prior period adjustment on the statement of retained earnings. 
C)  A gain or loss from disposing of the discontinued segment's net assets. 
D)  A gain or loss from operation of a discontinued segment. 
E)  Part of continuing operations in before tax dollars.

Question 11

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

Accepted Answer

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

Question 12

The current year-end balance sheet data for a company are shown below.Calculate the company's:
(a)working capital
(b)current ratio
(c)acid-test ratio.
Assets:
 $$\begin{array} { l l } 
\text { Cash } & \$ 38,000 \
\text { Marketable securities } & 45,000 \
\text { Accounts receivable (net) } & 127,500 \
\text { Merchandise inventory } & 149,500 \
\text { Long-term investments } & 135,000 \
\text { Plant assets (net) } & \$ 17,500 \
\text { Total assets } & \$ 1,012,500
\end{array}$$ 
Liabilities and equity:
 $$\begin{array} { l c } 
\text { Accounts payable } & \$ 148,700 \
\text { Accrued liabilities } & 90,000 \
\text { Notes payable (secured by plant assets) } & 254,800 \
\text { Common stock (\$1 2 par) } & 180,000 \
\text { Contributed capital in excess of par } & 135,000 \
\text { Retained earnings } & \underline { 204,000 } \
\text { Total liabilities and equity } & \$ 1,012,500
\end{array}$$

Accepted Answer

The answer of The current year-end balance sheet data for...

Question 13

Use the following selected information from Wheeler,LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.
$\begin{array}{|l|r|r|}
\hline&2017&2016\
\hline \text { Net sales } & \$ 276,200 & \$ 231,400 \
\hline \text { Cost of goods sold } & 151,900 & 129,590 \
\hline \text { Operating expenses } & 55,240 & 53,240 \
\hline \text { Net earnings } & 27,820 & 19,820\
\hline
\end{array}$

Accepted Answer

A)  36.4% for 2017 and 41.1% for 2016. 
B)  55.0% for 2017 and 56.0% for 2016. 
C)  119.4% for 2017 and 100.0% for 2016. 
D)  117.2% for 2017 and 100.0% for 2016. 
E)  65.1% for 2017 and 56.0% for 2016.

Question 14

The ability to generate future revenues and meet long-term obligations is referred to as:

Accepted Answer

A)  Liquidity and efficiency. 
B)  Solvency. 
C)  Profitability. 
D)  Market prospects. 
E)  Creditworthiness.

Question 15

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

A) True 
 B)False

Question 16

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once.
-Basic Earnings per Share

Accepted Answer

A) Market Prospects 
B) Liquidity and Efficiency 
C) Solvency 
D) Profitability

Question 17

Standards for comparisons in financial statement analysis do not include:

Accepted Answer

A)  Intra-company standards. 
B)  Competitors' standards. 
C)  Industry standards. 
D)  Management standards. 
E)  Guidelines (rules of thumb).

Question 18

Common-size statements:

Accepted Answer

A)  Reveal changes in the relative importance of each financial statement item to a base amount. 
B)  Do not emphasize the relative importance of each item. 
C)  Compare financial statements over time. 
D)  Show the dollar amount of change for financial statement items. 
E)  Reveal patterns in data across successive periods.

Question 19

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Question 20

________ financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

Accepted Answer

The answer of ________ financial statements are reports where financial...

Exam 13: Analysis of Financial Statements

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

Zhang Company reported Cost of goods sold of $835,000,beginning Inventory of $37,200 and ending Inventory of $46,300.The average Inventory amount is:

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

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?

The measurement of key relationships between financial statement items is known as ________.

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once. -Debt Ratio

Gains and losses that are neither unusual nor infrequent are reported as:

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

The ability to generate future revenues and meet long-term obligations is referred to as:

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

Match the financial analysis building block most appropriately associated with each ratio. Each building block may be used more than once. -Basic Earnings per Share

Standards for comparisons in financial statement analysis do not include:

Common-size statements:

Profitability is the ability to generate positive market expectations.

________ financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.