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Exam 13: Analyzing and Interpreting Financial Statements

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Question 101

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The greater the times interest earned ratio,the greater the risk a company is exposed to.

A) True
B) False

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Question 102

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Intra-company analysis is based on comparisons with competitors.

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B) False

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Question 103

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Profitability is the ability to provide financial rewards to attract and retain financing.

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Powers Company reported Net sales of $1,200,000 and average Accounts Receivable,net of $78,500.The accounts receivable turnover ratio is:

Net income divided by net sales is the:

A company's calendar-year financial data are shown below.The company had total assets of $339,000 and total equity of $144,400 for the prior year.No additional shares of common stock were issued during the year.The December 31 market price per share is $49.50.Cash dividends of $19,500 were paid during the year.Calculate the following ratios for the company: (a)debt ratio (b)equity ratio (c)debt-to-equity ratio (d)times interest earned (e)total asset turnover

Net sales divided by Average accounts receivable,net is the:

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Clairmont Industries reported Net income of $283,000 and average Total assets of $637,000.The Return on total assets is:

Selected current year company information follows: Net income $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~\$$ 15,953 Net sales $~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~$ 712,855 Total liabilities, begirning-year $~~~~~~~~~~~~~~~~~~~~~~$ 83,932 Total liabilities, end-of-year $~~~~~~~~~~~~~~~~~~~~~~~~~~$ 103,20 Total stockholders' equity, begirnirg-year $~~~~~~~~~$ 198,935 Total stockholders' equity, end-of-year $~~~~~~~~~~~~~$ 121,85 The total asset turnover is:

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The working capital is:

Financial statement analysis applies analytical tools to financial statements and related data for making business decisions.

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

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in both dollar amounts and percentages,are referred to as:

Current assets minus current liabilities is:

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

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

The evaluation of company performance and financial condition includes evaluation of (1)past and current performance,(2)current financial position,and (3)future performance and risk.

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