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Exam 23: Financial Statement Analysis

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Question 21

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Which of the following is most likely to indicate that a firm is experiencing difficulty in collecting its receivables?

A) Its average collection period decreases from 36 to 32.
B) Its accounts receivable turnover increases from 8 to 10.
C) Its accounts receivable turnover decreases from 10 to 8.
D) The bad debt reserve decreases by 10%.

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

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Question 22

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Use the following information for the questions Shaw Enterprises Comparative Balance Sheet December 31, 2020 and 2019 -Using the comparative balance sheet assets given below, prepare a horizontal analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place.

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Question 23

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Comparison of amounts and percentages for only two years is adequate to indicate long-term trends.

Use the following information for the questions. -Using the information given, discuss Lee Corporation's outcomes compared to J & S Partnership.

Use the following information for the questions. Cody Sales & Service Comparative Income Statement For the Years Ended April 30, 2020 and 2019 -Using the information shown, prepare a horizontal analysis. Carry all calculations to two decimal places and then round to one decimal place.

The following financial information was taken from a firm's accounting records for 2019. Use this information to determine the items below. $\begin{array}{lrr} & \text { Jan. } 1 & \text { Dec. 31 } \\\text { Accounts Receivable } & \$ 285,000 & \$ 418,000 \\\text { Merchandise Inventory } & 375,000 & 425,000 \\\text { Net Credit Sales } & & 3,200,000 \\\text { Cost of Goods Sold } & & 2,200,000\end{array}$ (1.) Inventory turnover (2.) Accounts receivable turnover (3.)Average collection period of accounts receivable

A company reported an expense of $30,000 for the current year which was $5,000 higher than the previous year. The percentage increase from last year to this year is -----------.

The Szett Company has current assets of $650,000 and total liabilities of $430,000. Its current ratio is 2. The portion of current liabilities, therefore, must be equal to $300,000.

Sybaritic Corporation Income Statement For the Year Ended September 30, 2020 & 2019 Sybaritic Corporation Balance Sheet September 30, 2020 -Using the information given, analyze the liquidity of Sybaritic Corporation for the year 2020.

Common-size statements present comparative data side by side with items expressed as percentages.

In horizontal analysis, the change from year to year itself can be interpreted to represent the changes in external prices that impact the business.

The fair market value of a share of common stock is determined by dividing the stockholders' equity by the number of shares of common stock outstanding.

If the ratio of total stockholders' equity to total assets was greater in 2020 than in 2019, then:

The number of times bond interest earned ratio provides bondholders and stockholders with information related to a company's ability to pay required bond interest payments from its earnings.

Modern Products, Inc. had accounts receivable of $320,000 in 2019, and $358,000 in 2020. Net sales for 2020 were $3,160,000, and gross profit was $1,600,000. The accounts receivable turnover for 2020 was:

The----------- on total assets measures the earnings on the assets used by a company.

In horizontal analysis, the base year is the most recent year.

A comparison of data for the current period with the same data of the company for previous periods is called a(n)---------analysis.

The rate of return on sales measures how effectively management has used the assets of the company.

Selected financial ratios for Opus Company and its industry averages are given. What does the information suggest about Opus? $\begin{array}{lcr} & \text { Opus Company } & \text { Industry Average } \\\text { Inventory turnover } & 1.8 & 2.0 \\\text { Accounts receivable turnover } & 1.95 & 2.3 \\\text { Rate of return on total assets } & 15.6 & 16.5 \\\text { Rate of return on net sales } & 2.4 & 2.2\end{array}$