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Exam 13: Financial Statement Analysis

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Question 101

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Net sales are $3,250,000, beginning total assets are $1,400,000, and the asset turnover is 2.5 times. What is the ending total asset balance?

A) $1,300,000
B) $1,200,000
C) $1,400,000
D) $1,500,000

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

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Question 102

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The lower the _______________ to _______________ ratio, the more equity "buffer" is available to the creditors if the company becomes insolvent.

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Question 103

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Ed's Drive-In had $175,000 of current assets and $80,000 of current liabilities before borrowing $60,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Ed's Drive-In's current ratio?

Which of these is not a liquidity ratio?

Bill's Dollar Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $6,400,000. The accounts receivable turnover was

Stellar, Inc. decided on January 1 to discontinue its telescope manufacturing division. On July 1, the division's assets with a book value of $1,260,000 are sold for $900,000. Operating income from January 1 to June 30 for the division amounted to $195,000. Ignoring income taxes, what total amount should be reported on Stellar's income statement for the current year under the caption, Discontinued Operations?

State the effect of the following transactions on the current ratio. Use increase, decrease, or no effect for your answer. (a) Collection of an accounts receivable (b) Declaration of cash dividends (c) Additional stock is sold for cash (d) Accounts payable are paid (e) Equipment is purchased for cash (f) Inventory purchases are made for cash (g) Temporary investments are purchased for cash

A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons?

______________ analysis, also called trend analysis, is a technique for evaluating a series of financial statement data over a period of time.

Listed below are some selected Items that may appear on a corporate income statement. Indicate the order in which these items would appear on an income statement. (The first one should be assigned the number "1", the second "2," etc.) Income before income taxes Discontinued operations Net income Income from continuing operations Income tax expense

Short-term creditors are usually most interested in assessing

Selected data from the Florida Fruit Company are presented below: Instructions Assuming that no dividends were declared or paid during the period, calculate the following profitability ratios from the above information: 1. Profit margin 2. Asset turnover 3. Return on assets 4. Return on common stockholders' equity

The following information pertains to Unique Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the profit margin for this company?

In the vertical analysis of an income statement, each item is generally stated as a percentage of net income.

When a change in depreciation method occurs

All of the following statements regarding changes in accounting principles are true except which of the following?

Which one of the following would be considered a long-term solvency ratio?

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

The following information was taken from the financial statements of Bjorg Company: Instructions (a) Compute the net sales for each year. (b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year. (c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).

A common measure of profitability is the