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Exam 13: Financial Statement Analysis

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Question 41

Multiple Choice

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In a common size balance sheet, each item on the balance sheet is expressed as a percentage of:

A) total assets.
B) total liabilities.
C) net income.
D) total stockholders' equity.

E) B) and D)
F) All of the above

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Question 42

Multiple Choice

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If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered?

A) Liquidity
B) Market share
C) Profitability
D) Solvency

E) All of the above
F) A) and B)

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Question 43

Multiple Choice

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Which of the following measures would assist in assessing the profitability of a company?

If earnings per share (EPS) decreases, it must mean that the company's net income has fallen

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

The income statements for Urban Outfits, Inc. are presented below: Required: Part a. Prepare a horizontal analysis of the income statement above. Round to the nearest whole percent. Part b. Interpret your analysis. Comment on significant changes.

Horizontal analysis is the comparison of each financial statement amount to another amount on the same financial statement

The assumption that a business is capable of continuing its operations long enough to meet its obligations is called the:

Which of the following ratios is used to evaluate a company's liquidity?

Which of the following statements about trend analysis is correct?

The principle that requires companies to include notes to their financial statements is the:

A current ratio of less than one is not so much of a concern when the company has a:

The higher the times interest earned ratio, the greater the risk of nonpayment of interest

The following information is taken from the financial statements ofB. Darin Company: Expenses include interest of $10,000 and income tax of $90,000. There was an average of 40,000 shares of common stock outstanding during the year and the market price of the stock is $15 per share at the end of the year. There was no preferred stock outstanding during the year. Required: Calculate the following ratios for the current year: Part a. Fixed asset turnover Part b. Return on equity (ROE) Part c. Earnings per share (EPS) Part d. Times interest earned Part e. Price/Earnings ratio Part f. Debt-to-assets ratio Part g. Net profit margin

If cost of goods sold remains unchanged, an increase in the inventory turnover ratio is indicative of a(n) :

A company had 10,000 shares of common stock outstanding throughout the year. The following information is also available: Required: Calculate the Price/Earnings ratio at the end of the current year.

The fixed asset turnover ratio is a profitability ratio

Which of the following is calculated by dividing net revenue by average net fixed assets?

The going-concern assumption is also known as the continuity assumption

Which of the following ratios is a solvency ratio?