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Exam 13: Analyzing and Interpreting Financial Statements

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Question 81

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The comparison of a company's financial condition and performance to a base amount is known as:

A) Financial reporting.
B) Horizontal ratios.
C) Investment analysis.
D) Risk analysis.
E) Vertical analysis.

F) C) and E)
G) A) and C)

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Question 82

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Horizontal analysis is the comparison of a company's financial condition and performance across time.

A) True
B) False

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Question 83

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Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

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

The building blocks of financial statement analysis include (1)liquidity,(2)solvency,(3)profitability,and (4)market prospects.

Net income divided by average total assets is:

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current ratio is:

The comparison of a company's financial condition and performance to a base amount is known as ________.

All of the following are true of a financial statement analysis report,except:

A corporation reported cash of $14,000 and total assets of $178,300.Its common-size percent for cash equals 7.85%.

Refer to the following selected financial information from McCormik,LLC.Compute the company's accounts receivable turnover for Year 2. $\begin{array} { l r r } & { \text { Year 2 } } & \text { Year 1 } \\\text { Cash } & \$37,500 & \$ 36,850 \\\text { Short-term irvestrnents }& 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchardise irventory } & 121,00 0 & 117,000 \\\text { Prepaid experses } & 12,100 & 13,500 \\\text { Plart assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,40 0 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold }& 390,000 & 385,500\end{array}$

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

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:

Standards for comparisons in financial statement analysis do not include:

The gross margin ratio,return on total assets,and basic earnings per share are all ________ ratios.

Liquidity refers to the availability of resources to meet short-term cash requirements.

A corporation reports the following year-end balance sheet data.The company's equity ratio equals: $\begin{array} { l r l r r } \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \\\text { Accourts receivable } & 55,000 & \text { Long-temn liabilities } & 35,000 \\\text { Irventory } & 60,000 & \text { Cormon stock } & 100,000 \\\text { Equiprment } & \underline{145,000} & \text { Retaired earnirgs } & \underline{90,000} \\\text { Total assets } & \underline{\$ 300,000} & \text { Total liabilities ard equity } & \underline{\$ 300,000}\end{array}$

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what is the revenue trend percent for Years 2 and 3?

General standards of comparisons,developed from experience,include the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.