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Exam 9: Financial Statement Analysis

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Question 51

Multiple Choice

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The Abel Company provided the following information from its financial records: What is the amount of the company's earnings per share?

A) $0.82
B) $1.00
C) $0.90
D) $0.75

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

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Question 52

Multiple Choice

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Grove Corporation had sales of $3,000,000, cost of sales of $2,250,000, and average inventory of $500,000. What was Grove's inventory turnover ratio for the period?

A) 1.6 times
B) 6 times
C) 4.5 times
D) 23 times

E) A) and B)
F) B) and D)

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Question 53

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The accounting concept or principle that is perhaps the greatest single culprit in distorting the results of financial statement analysis is the:

Benson Company declared and paid a cash dividend totaling $500,000 on its common stock. As a result of this transaction, the company's debt to assets ratio will:

The Fortune Company reported the following income for Year 2: What is the company's number of times interest is earned ratio?

Benson Company received cash of $5,000,000 by issuing 20-year bonds payable. As a result of this transaction, the company's current ratio will:

Profitability ratios attempt to assess the company's ability to generate earnings.

The only requirement involved in communicating useful information is that the information be accurate.

In terms of solvency, the larger the number of times interest is earned, the better.

The accounts receivable turnover ratio can be used to asses a firm's solvency.

If the company purchased a $60,000 piece of equipment by paying $30,000 and having the rest financed with a short-term note from the bank, then immediately after this transaction what is the expected impact on the components of the current ratio?

Milton Company has total current assets of $46,000, including inventory of $10,000, and current liabilities of $20,000. The company's current ratio is:

The following balance sheet information is provided for Duke Company for Year 2: What is the company's current ratio?

As of December 31, Year 1, Gant Corporation had a current ratio of 1.29, quick ratio of 1.05, and working capital of $18,000. The company uses a perpetual inventory system and sells merchandise for more than it cost. On January 1, Year 2, Gant sold inventory on account. Which of the following statements is incorrect?

Which of the following is a potential limitation of financial statement analysis?

The following balance sheet information is provided for Apex Company for Year 2: What is the company's working capital?

Current financial reporting standards assume that users of accounting information:

The following partial balance sheet is provided for Groome Company: What is the company's quick (acid-test) ratio?

The Dennis Company reported net income of $50,000 on sales of $300,000. The company has average total assets of $500,000 and average total liabilities of $100,000. What is the company's return on equity ratio?

The quick ratio although similar to the current ratio is more conservative.