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Exam 13: Analyzing and Interpreting Financial Statements

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Question 91

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Refer to the following selected financial information from Shakley's Incorporated.Compute the company's profit margin for Year 2. $\begin{array} { l r r } & \text { Year 2 } & \text { Year } 1 \\\text { Net sales } & \$ 478,500 & \$ 426,250 \\\text { Cost of goods sold } & 276,300 & 250,120 \\\text { Irterest experse } & 9,700 & 10,700 \\\text { Net incomebefore tax }& 67,250 & 52,680 \\\text { Net income after tax } & 46,050 & 39,900 \\\text { Total assets } & 317,100 & 288,000 \\\text { Total liabilities }& 181,40 0 & 167,300 \\\text { Total equity } & 135,70 0 & 120,700\end{array}$

A) 14.1%.
B) 11.7%.
C) 9.6%.
D) 16.7%.
E) 33.9%.

F) B) and D)
G) A) and D)

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Question 92

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The dollar change for a comparative financial statement item is calculated by:

A) Subtracting the analysis period amount from the base period amount.
B) Subtracting the base period amount from the analysis period amount.
C) Subtracting the analysis period amount from the base period amount,dividing the result by the base period amount,then multiplying that amount by 100.
D) Subtracting the base period amount from the analysis period amount,dividing the result by the base period amount,then multiplying that amount by 100.
E) Subtracting the base period amount from the analysis amount,then dividing the result by the base amount.

F) None of the above
G) C) and D)

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Question 93

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

Trend percentage is calculated by dividing ________ by ________ and multiplying the result by 100.

The return on common stockholder's equity measures a company's success in earning net income for its owners.

If a company is comparing this year's financial performance to last year's financial performance,it is using horizontal analysis.

Express the following balance sheets for Safety Company in common-size percentages.

In horizontal analysis the percent change is computed by:

The building blocks of financial statement analysis do not include:

Intra-company standards for financial statement analysis:

Identify and describe three common tools of financial statement analysis.

Standards for comparison are not generally necessary when making judgments about a company's performance.

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

The comparative income statements for Silverlight Company are shown below.Calculate the following ratios for Year 2: (a)profit margin (b)gross margin (c)times interest earned.

Refer to the following selected financial information from Shakley's Incorporated.Compute the company's return on total assets for Year 2. $\begin{array} { l r r } & \text { Year 2 } & \text { Year } 1 \\\text { Net sales } & \$ 478,500 & \$ 426,250 \\\text { Cost of goods sold } & 276,300 & 250,120 \\\text { Irterest experse } & 9,700 & 10,700 \\\text { Net incomebefore tax }& 67,250 & 52,680 \\\text { Net income after tax } & 46,050 & 39,900 \\\text { Total assets } & 317,100 & 288,000 \\\text { Total liabilities }& 181,40 0 & 167,300 \\\text { Total equity } & 135,70 0 & 120,700\end{array}$

The base amount for a common-size balance sheet is usually total assets.

Market prospects are the ability to generate positive market expectations.

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

The purpose of financial statement analysis for internal users is to provide information to improve efficiency and effectiveness.

The four building blocks of financial analysis are (1)________,(2)________,(3)________ and (4)________.