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Exam 13: Analysis of Financial Statements

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Question 41

True/False

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

A) True
B) False

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Question 42

Multiple Choice

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Refer to the following selected financial information from Winterfell Company.Compute the company's debt to equity for Year 2.

A) 0.9.
B) 1.1.
C) 0.5.
D) 1.9.
E) 2.1.

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

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Question 43

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Current assets minus current liabilities is:

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

Refer to the following selected financial information from Troy Manufacturing. -Compute the company's current ratio.

The standards for comparisons when interpreting measures from financial statement analysis include (1)________,(2)________,(3)________,and (4)________.

The measurement of key relations among financial statement items is known as:

Comparative calendar year financial data for a company are shown below.Calculate the following ratios for Year 2: (a)return on total assets (b)return on common stockholders' equity.

External users of accounting information manage and operate the company.

Refer to the following selected financial information from Texas Electronics. -Compute the company's current ratio for Year 2.

Capital structure measures a company's ability to earn net income from sales.

The greater the times interest earned ratio,the greater the risk a company will not be able to pay interest expense.

Market prospects is the ability to meet short-term obligations.

Powers Company reported net sales of $1,200,000,average Accounts Receivable,net of $78,500,and net income of $51,025.The Day's sales uncollected (rounded to whole days) is:

The evaluation of company performance and financial condition includes evaluation of (1)past and current performance,(2)current financial position,and (3)future performance and risk.

Horizontal analysis is used to understand the relative importance of each financial statement item.

Carducci Corporation reported net sales of $3.6 million,average total assets of $1.1 million,and net income of $847,000.The total asset turnover is:

________ financial statements are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

Refer to the following selected financial information from Phantom Corp. -Compute the company's days' sales in inventory for Year 2.(Use 365 days a year.)

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500.Using Year 1 as the base year,the percent change for Year 2 compared to the base year is: