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Exam 17: Analysis of Financial Statements

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Question 1

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Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

A) True
B) False

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Question 2

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Financial reporting refers to:

A) The application of analytical tools to general-purpose financial statements.
B) The communication of financial information useful for decision making.
C) Financial statements only.
D) Ratio analysis.
E) Profitability.

F) B) and E)
G) A) and E)

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Question 3

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Selected current year company information follows: The total asset turnover is:

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

Annual cash dividends per share divided by market price per share is the:

Common-size statements:

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

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

Use the following information from the current year financial statements of a company to calculate the ratios below: (a)Current ratio. (b)Accounts receivable turnover.(Assume the prior year's accounts receivable balance was $100,000.) (c)Days' sales uncollected. (d)Inventory turnover.(Assume the prior year's inventory was $50,200.) (e)Times interest earned ratio. (f)Return on common stockholders' equity.(Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.) (g)Earnings per share (assuming the corporation has a simple capital structure,with only common stock outstanding). (h)Price earnings ratio.(Assume the company's stock is selling for $26 per share.) (i)Divided yield ratio.(Assume that the company paid $1.25 per share in cash dividends.)

Industry standards for financial statement analysis:

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

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?

Comparative horizontal analysis is used to reveal patterns in data covering successive periods.

Intra-company analysis is based on comparisons with competitors.

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

A financial statement analysis report usually includes:

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the:

The following information is available for the McCartney Corporation: Calculate the company's inventory turnover and its days' sales in inventory.

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

Which of the following items is not likely an extraordinary item?