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Exam 13: Analysis of Financial Statements

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Question 1

Multiple Choice

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One of several ratios that reflects solvency includes the:

A) Acid-test ratio.
B) Current ratio.
C) Times interest earned ratio.
D) Total asset turnover.
E) Days' sales in inventory.

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

Correct Answer

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C

Question 2

Multiple Choice

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Quick assets (cash,short-term investments,and current receivables) divided by current liabilities is the:

A) Acid-test ratio.
B) Current ratio.
C) Working capital ratio.
D) Current liability turnover ratio.
E) Quick asset turnover ratio.

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

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Question 3

Multiple Choice

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Evaluation of company performance can include comparison and/or assessment of all but which of the following:

A good financial statement analysis report usually includes the following six sections: (1)________,(2)________,(3)________,(4)________ (5)________,and (6)________.

Profitability is the ability to provide financial rewards sufficient to attract and retain financing.

The comparative balance sheet for Silverlight Co.is shown below.Express the balance sheet in common-size percentages.

Efficiency refers to how productive a company is in using its assets,and is usually measured relative to how much revenue is generated from a certain level of assets.

Selected current year company information follows: The return on total assets is:

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

A corporation reported cash of $14,000,total assets of $178,300,and net income of $50,000.Its common-size percent for cash equals 7.85%.

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

External users of accounting information make the strategic and operating decisions of a company.

Use the financial data shown below to calculate the following ratios for the current year: (a)Current ratio. (b)Acid-test ratio. (c)Accounts receivable turnover. (d)Days' sales uncollected. (e)Inventory turnover. (f)Days' sales in inventory.

Auditors use financial statements to assess "fair presentation" of financial results.

Net sales divided by average total assets is the:

An example of a guideline (or rule of thumb)for comparison is the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

Match each of the appropriate formulas with correct term. -

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

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?

Clairmont Industries reported net income of $283,000,average total assets of $637,000,and comprehensive income of $354,172.The return on total assets is: