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Exam 17: Analysis of Financial Statements

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Question 51

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A corporation reports the following year-end balance sheet data.Calculate the following ratios: (a)working capital (b)acid-test ratio (c)current ratio (d)debt ratio (e)equity ratio (f)debt-to-equity ratio Cash……………………….. $ 40,000 Current liabilities $ 64,000 Accounts receivable………. 35,000 Long-term liabilities……….72,000 Inventory………………….. 60,000 Common stock……………..100,000 Equipment………………… 150,000 Retained earnings…………. 49,000 Total assets……………….. $285,000 Total liabilities and equity $285,000

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Question 52

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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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Question 53

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Ratios,like other analysis tools,are only historically oriented.

Profitability is the ability to generate future revenues and meet long-term obligations.

The following summaries from the income statements and balance sheets of Neeko,Inc.and Saxony,Inc.are presented below. (1)For both companies for 2014,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 2014,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?

Use the following selected information from Farris,LLC to determine the Year 2 and Year 1 trend percents for net sales using Year 1 as the base.

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Net income divided by net sales is the:

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

Standards for comparisons in financial statement analysis include:

The ability to generate future revenues and meet long-term obligations is referred to as:

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

The comparison of a company's financial condition and performance across time is known as:

Comparative financial statements are reports that show financial amounts placed side by side in columns on a single statement for analysis purposes.

The ability to generate positive market expectations is called:

The building blocks of financial statement analysis include:

The average number of times a company's inventory is sold during an accounting period,calculated by dividing cost of goods sold by the average inventory balance,is the:

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals:

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals 21.4%.

One of several ratios that reflects solvency includes the: