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Exam 13: Analysis of Financial Statements

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Question 121

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A corporation reports the following year-end balance sheet data. The company's current ratio equals: $\begin{array}{lrrr}\text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 5,000 \\\text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \\\text { Inventory } & 60,000 & \text { Common stock } & 100,000 \\\text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \\\text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \\\end{array}$

A) 0.58
B) 1.27
C) 2.07
D) 0.37
E) 0.63

F) B) and D)
G) None of the above

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Question 122

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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:

A) 24 days.
B) 15 days.
C) 4 days.
D) 562 days.
E) 48 days

F) A) and C)
G) B) and D)

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Question 123

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The comparison of a company's financial condition and performance to a base amount is known as ________.

Refer to the following selected financial information from Texas Electronics. Compute the company's days' sales uncollected for Year 2. (Use 365 days a year.) $\begin{array}{lrr}& \text { Year 2 } & \text { Year 1 } \\\text { Cash } & \$ 37,500 & \$ 36,850 \\\text { Short-term investments } & 90,000 & 90,000 \\\text { Accounts receivable, net } & 85,500 & 86,250 \\\text { Merchandise inventory } & 121,000 & 117,000 \\\text { Prepaid expenses } & 12,100& 13,500\\\text { Plant assets } & 388,000 & 392,000 \\\text { Accounts payable } & 113,400 & 111,750 \\\text { Net sales } & 711,000 & 706,000 \\\text { Cost of goods sold } & 390,000 & 385,500\end{array}$

Refer to the following selected financial information from Whirlpool Company. Compute the company's accounts receivable turnover for Year 2. $\begin{array}{lrr} & \text { Year 2 } & \text { Year 1 } \\\text { Accounts receivable, net } & 86,500 & 82,750 \\\text { Net sales } & 723,000 & 693,000\end{array}$

Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for Year 2: (a) accounts receivable turnover (b) day's sales uncollected (c) inventory turnover (d) days' sales in inventory

Debt financing is considered riskier than equity financing because of its required payments of interest and principal.

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. Income statement data Sales (all on credit) $650,000 Cost of goods sold 425,000 Income before taxes 78,000 Net income 54,600 $\begin{array}{|l|r|r|} \hline& \begin{array}{r}\text { Ending } \\\text { Balance }\end{array} & \begin{array}{r}\text { Beginning } \\\text { Balance }\end{array} \\\hline \text { Cash } & \$ 19,500 & \$ 15,000 \\\hline \text { Accounts receivable (net) } & 65,00 0 & 60,000 \\\hline \text { Inventory } & 71,500 & 64,500 \\\hline \text { Plant and equipment (net) } & 195,000 & 183,900 \\\hline \text { Total assets } & \$ 351,000 & \$ 323,400 \\\hline\end{array}$ $\begin{array}{|l|r|r|}\hline \text { Current liabilities } & \$ 62,400 & \$ 52,700 \\\hline \text { Long-term notes payable } & 97,500 & 100,00 \\\hline\end{array}$

The current year-end balance sheet data for a company are shown below. Calculate the company's: (a) working capital (b) current ratio (c) acid-test ratio. Assets: Cash $ 38,000 Marketable securities 45,000 Accounts receivable (net) 127,500 Merchandise inventory 149,500 Long-term investments 135,000 Plant assets (net) 517,500 Total assets $ 1,012,500 Liabilities and equity: Accounts payable $ 148,700 Accrued liabilities 90,000 Notes payable (secured by plant assets) 254,800 Common stock ($12 par) 180,000 Contributed capital in excess of par 135,000 Retained earnings 204,000 Total liabilities and equity $1,012,500

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

Earnings per share is calculated using income before interest and income taxes.

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

Financial reporting refers to:

An example of an intracompany comparison is comparing Apple's profit margin to the industry's profit margin.

Net sales divided by average total assets is the: