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Exam 13: Interpreting Financial Statements

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Question 51

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Ratios can be expressed as a percent, rate, or proportion.

A) True
B) False

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Question 52

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One of several ratios that reflects solvency includes the:

A) Acid-test ratio
B) Current ratio
C) Times interest earned ratio
D) Total asset turnover
E) Days' sales in inventory

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

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Question 53

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Match each of the following terms with the appropriate definitions.

A company has total assets of $5,600,482, common stock of $2,111,111, retained earnings of $1,058,473. What is the company's equity ratio?

A company had a profit margin of 8%. If net income equaled $40,000 and average total assets equaled $332,500, how much were net sales?

A company can change from one acceptable accounting principle to another as long as the change improves the usefulness of information in its financial statements.

Corona Company's balance sheet accounts follow: What is Corona Company's days' sales uncollected ratio for 2014 assuming net sales and gross profit for the period were $1,236,783, $927,587 respectively?

A company has a current ratio of 1.92, total liabilities of $193,849, long-term notes payable of $85,791, and a quick ratio of .96. What are total current assets for the company?

Expropriation of property by a foreign government is considered an extraordinary item.

What is the purpose of a good financial statement analysis report? What are the key components?

The ability to provide financial rewards sufficient to attract and retain financing is called:

______________________ ratios include the price-earnings ratio and dividend yield.

A corporation had cash of $14,000 and total assets of $178,300. On a common-size balance sheet, cash would be reported as 7.85%.

Net sales divided by average total assets is equal to the:

The standards for comparisons in financial statement analysis include (1) _______________, (2) ________________, (3) _________________ and (4) _______________.

A company had a return on common stockholders' equity of 22%. Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000. Compute the amount of the preferred dividends declared.

Given the following information about a corporation's current year activities, answer the questions below: Compute the amounts that should be reported on the income statement as: (1) Income from continuing operations. (2) Income before extraordinary items and cumulative effect of changes in accounting principles. (3) Net income.

Calculate the percent increases for each of the following selected balance sheet items.

The following information is from Omega Corporation's balance sheets as of December 31, 2013 and 2014 and its income statement for 2014: $\begin{array}{|l|r|r|} \hline&{2014} &{2013} \\\hline \text { Assets: } & & \\\hline \text { Cash } & \$ 18,000 & \$ 22,000 \\\hline \text { Marketable securities } & 25,000 & 0 \\\hline \text { Accounts receivable } & 38,000 & 42,000 \\\hline \text { Inventory } & 61,000 & 52,000 \\\hline \text { Prepaid insurance } & 6,000 & 9,000 \\\hline \text { Long-term investments } & 49,000 & 20,000 \\\hline \text { Plant assets, net } & \underline{218,000} & \underline{225,000} \\\hline \text { Total assets } & \underline{\$ 415,000} & \underline{\$ 370,000} \\\hline\\\hline \text { Net income } & \$ 62,250 \\\hline \text { Sales (all on credit) } & 305,000 \\\hline \text { Cost of goods sold } & 123,000 \\\hline \text { Interest expense } & 15,600 \\\hline \text { Income tax expense } & 27,000\\\hline\end{array}$ From the above information, calculate the following ratios for 2014: (a) Inventory turnover. (b) Accounts receivable turnover. (c) Return on total assets. (d) Times interest earned. (e) Total asset turnover.

Three of the most common tools of financial analysis are (1) _________________________, (2) ___________________________ and (3) ______________________________.