Question 1

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

Accepted Answer

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

Question 2

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 3

Identify the financial analysis building block most appropriately associated with each ratio listed below by placing the letter of the building block a through d beside each ratio 1 through 10. Each building block may be used more than once.
A. Liquidity and Efficiency
B. Solvency
C. Profitability
D. Market Prospects
________ (1) Price Earnings Ratio
________ (2) Dividend Yield
________ (3) Accounts Receivable Turnover
________ (4) Days' Sales in Inventory
________ (5) Return on Total Assets
________ (6) Equity Ratio
________ (7) Debt Ratio
________ (8) Inventory Turnover
________ (9) Basic Earnings per Share
________ (10) Times Interest Earned

Accepted Answer

The answer of Identify the financial analysis building block most...

Question 4

The percent change of a comparative financial statement item is computed by subtracting the estimated period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

Accepted Answer

A) True 
 B)False

Question 5

When an item has a value in the base period and zero in the analysis period, the decrease is 100 percent.

Accepted Answer

A) True 
 B)False

Question 6

A financial statement analysis report does not include:

Accepted Answer

A)  An auditor statement. 
B)  An analysis overview. 
C)  An executive summary. 
D)  Qualitative and quantitative key factors. 
E)  Inferences such as forecasts.

Question 7

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

A) True 
 B)False

Question 8

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Question 9

When an item has a value in the base period and zero in the analysis period, the decrease is 0 percent.

Accepted Answer

A) True 
 B)False

Question 10

For the following financial statement items, calculate trend percentages using Year 1 as the base year:

Accepted Answer

The answer of For the following financial statement items, calculate...

Question 11

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

Accepted Answer

A)  87%. 
B)  100%. 
C)  115%. 
D)  15%. 
E)  13%.

Question 12

A corporation reports the following year-end balance sheet data. The company's working capital equals: $\begin{array}{lrrr}
\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \
\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\text { Inventory } & 60,000 & \text { Common stock } & 100,000 \
\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \
\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \
\end{array}$

Accepted Answer

A)  $80,000 
B)  $155,000 
C)  $75,000 
D)  $300,000 
E)  $190,000

Question 13

A corporation reported cash of $27,000, total assets of $461,000, and total equity of $157, 895 on its balance sheet. Its common-size percent for cash equals:

Accepted Answer

A)  17.1%. 
B)  58.6%. 
C)  100%. 
D)  5.86%. 
E)  1707%.

Question 14

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is:

Accepted Answer

A)  1.4 : 1. 
B)  0.77 : 1. 
C)  0.54 : 1. 
D)  1 : 1. 
E)  0.64 : 1.

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

External users of accounting information manage and operate the company.

Accepted Answer

A) True 
 B)False

Question 17

The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) fair presentation.

Accepted Answer

A) True 
 B)False

Question 18

Use the balance sheets of Glover shown below to calculate the following ratios for Year 2 (round to the hundredths):
(a) Current ratio.
(b) Acid-test ratio.
(c) Debt ratio.
(d) Equity ratio.

Accepted Answer

The answer of Use the balance sheets of Glover shown...

Question 19

A good financial statement analysis report usually includes the following six sections: (1) ________, (2) ________, (3) ________, (4) ________ (5) ________, and (6) ________.

Accepted Answer

The answer of A good financial statement analysis report usually...

Question 20

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.

Accepted Answer

A) True 
 B)False

Exam 13: Analysis of Financial Statements

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

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 percent change of a comparative financial statement item is computed by subtracting the estimated period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

When an item has a value in the base period and zero in the analysis period, the decrease is 100 percent.

A financial statement analysis report does not include:

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Profitability is the ability to generate positive market expectations.

When an item has a value in the base period and zero in the analysis period, the decrease is 0 percent.

For the following financial statement items, calculate trend percentages using Year 1 as the base year:

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500. Using Year 1 as the base year, the percent change for Year 2 compared to the base year is:

A corporation reported cash of $27,000, total assets of $461,000, and total equity of $157, 895 on its balance sheet. Its common-size percent for cash equals:

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is:

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

External users of accounting information manage and operate the company.

The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) fair presentation.

Use the balance sheets of Glover shown below to calculate the following ratios for Year 2 (round to the hundredths): (a) Current ratio. (b) Acid-test ratio. (c) Debt ratio. (d) Equity ratio.

A good financial statement analysis report usually includes the following six sections: (1) , (2) , (3) , (4) (5) , and (6) .

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.