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Exam 15: Financial Statement Analysis

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Question 21

Multiple Choice

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The particular analytical measures chosen to analyze a company may be influenced by all of the following except:

A) industry type
B) capital structure
C) diversity of business operations
D) product quality or service effectiveness

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

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Question 22

Multiple Choice

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Balance sheet and income statement data indicate the following: $\begin{array}{ll}\$ 1,000,000 & \text { Bonds payable, } 10 \% \text { (issued } 1988 \text { due 2012) } \\300,000 & \text { Preferred } 5 \% \text { stock, } \$ 100 \text { par (no change during year) } \\2,000,000 & \text { Common stock, } \$ 50 \text { par (no change during year) } \\350,000 & \text { Income before income tax for year } \\80,000 & \text { Income tax for year } \\50,000 & \text { Common cividends paid } \\15,000 & \text { Preferred dividends paid }\end{array}$ Based on the data presented above, what is the number of times bond interest charges were earned (round to one decimal point) ?

A) 3.7
B) 4.4
C) 4.5
D) 3.5

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

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Question 23

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From the following data, determine for the current year the (a) rate earned on total assets, (b) rate earned on stockholders' equity, (c) rate earned on common stockholders' equity, (d) earnings per share on common stock, (e) price-earnings ratio on common stock, and (f) dividend yield on common stock. Assume that the current market price per share of common stock is $25. (Present key figures used in your computations.)

Revenue and expense data for Young Technologies are as follows: Required:

A company with $60,000 in current assets and $40,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

The purpose of an audit is to

Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

The following information has been condensed from the December 31 balance sheets of Hanson Co.:

Revenue and expense data for Martinez Company are as follows:

Gallant Company reported net income of $2,500,000. The income statement included one extraordinary item: a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations, both after applicable income tax. There were 100,000 shares of $10 par common stock and 40,000 shares of $4 preferred stock outstanding throughout the current year. Required: Prepare the earnings per share section of Gallant Company's income statement.

When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item after income from continuing operations on the income statement.

An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

An advantage of the current ratio is that it considers the makeup of the current assets.

The relationship of $275,000 to $125,000, expressed as a ratio, is

In horizontal analysis, the current year is the base year.

Based on the following data for the current year, what is the inventory turnover? $\begin{array}{ll}\$ 500,000 & \text { Net sales on account during year } \\330,000 & \text { Cost of merchandise sold during ye } \mathrm{yr} \\45,000 & \text { Accounts receivable, begiming of ye ar } \\35,000 & \text { Accounts receivable, end of year } \\90,000 & \text { Inventory, begiming of year } \\110,000 & \text { Inventory, end of year }\end{array}$

The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as

In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. They had 50,000 shares of common stock outstanding during the entire year. Robert Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Robert Corporation's price-earnings ratio is

A company reports the following: Determine the number of times interest charges are earned. Round your answer to one decimal place.