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Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

A) True
B) False

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Standards for comparison when interpreting financial statements include competitor and industry performance data.

A) True
B) False

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Annual cash dividends per share divided by market price per share is the:


A) Price-earnings ratio.
B) Price-dividends ratio.
C) Profit margin.
D) Dividend yield ratio.
E) Earnings per share.

F) A) and C)
G) All of the above

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One purpose of financial statement analysis for internal users is to provide information to improve efficiency and effectiveness.

A) True
B) False

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

A) True
B) False

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


A) Financial reporting.
B) Horizontal analysis.
C) Investment analysis.
D) Ratio analysis.
E) Risk analysis.

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

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Use the following selected information from Whitman Corp. to determine the Year 1 and Year 2 trend percentages for net sales using Year 1 as the base.  Year 2 Year 1 Net sales $276,200$231,400 Cost of goods sold 151,900129,590 Operating expenses 55,24053,240 Net earnings 27,82019,820\begin{array}{lrr}& \text { Year } 2 & \text { Year } 1 \\\text { Net sales } & \$ 276,200 & \$ 231,400 \\\text { Cost of goods sold } & 151,900 & 129,590 \\\text { Operating expenses } & 55,240 & 53,240 \\\text { Net earnings } & 27,820 & 19,820\end{array}


A) 36.4% for Year 2 and 41.1% for Year 1.
B) 55.0% for Year 2 and 56.0% for Year 1.
C) 119.4% for Year 2 and 100.0% for Year 1.
D) 117.2% for Year 2 and 100.0% for Year 1.
E) 65.1% for Year 2 and 64.6% for Year 1.

F) All of the above
G) B) and E)

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Explain the purpose of financial statement analysis for both external and internal users.

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The purpose of financial statement analy...

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

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Refer to the following selected financial information from Texas Electronics. Compute the company's acid-test ratio for Year 2.  Year 2  Year 1  Cash $37,500$36,850 Short-term investments 90,00090,000 Accounts receivable, net 85,50086,250 Merchandise inventory 121,000117,000 Prepaid expenses 12,10013,500 Plant assets 388,000392,000 Accounts payable 113,400111,750 Net sales 711,000706,000 Cost of goods sold 390,000385,500\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}


A) 2.26.
B) 1.98.
C) 2.95.
D) 3.05.
E) 1.88.

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

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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:


A) 0.31 times.
B) 3.27 times.
C) 4.30 times.
D) 2.27 times.
E) 0.77 times.

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

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The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios? The following summaries from the income statements and balance sheets of Kouris Company and Brittania, Inc. are presented below. (1) For both companies for Year 2, compute the: (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for Year 2, compute the: (a) Profit margin ratio (b) Return on total assets (c) Return on common stockholders' equity Which company do you consider to have better profitability ratios?

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#1
blured image Brittania has higher current ratios...

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If a company is comparing this year's financial performance to last year's financial performance, it is using horizontal analysis.

A) True
B) False

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Refer to the following selected financial information from Troy Manufacturing. Compute the company's working capital.  Current Assets 306,450 Plant assets 338,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000\begin{array}{lr}\text { Current Assets } & 306,450 \\\text { Plant assets } & 338,000 \\\text { Current Liabilities } & 107,800 \\\text { Net sales } & 676,000 \\\text { Net Income } & 75,000\end{array}


A) $536,650.
B) $230,200.
C) $568,200.
D) $198,650.
E) $231,450.

F) All of the above
G) B) and C)

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

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


A) Financial reporting.
B) Horizontal ratios.
C) Liquidation analysis.
D) Sensitivity analysis.
E) Vertical analysis.

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

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Jones Corp. reported current assets of $193,000, current liabilities of $137,000, and total liabilities of $275, 714 on its most recent balance sheet. The current ratio is:


A) 1.4 : 1.
B) 0.7 : 1.
C) 0.3 : 1.
D) 1 : 1.
E) 0.4 : 1.

F) B) and C)
G) B) and E)

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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 accounts receivable turnover ratio is:


A) 0.65 times.
B) 14.3 times.
C) 28.6 times.
D) 15.3 times.
E) 16.3 times.

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

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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:


A) 55.6%.
B) 88.8%.
C) 61.5%.
D) 44.4%.
E) 125.1%.

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

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Current assets divided by current liabilities is the:


A) Current ratio.
B) Quick ratio.
C) Debt ratio.
D) Liquidity ratio.
E) Solvency ratio.

F) B) and C)
G) B) and E)

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Showing 101 - 120 of 235

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