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Exam 15: Financial Statement Analysis

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Question 31

Multiple Choice

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Which of the following would appear as an extraordinary item on the income statement?

A) loss resulting from the sale of fixed assets
B) gain resulting from the disposal of a segment of the business
C) loss from land condemned for public use
D) liquidating dividend

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

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Question 32

Multiple Choice

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The following information pertains to Newman Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the rate earned on total assets for this company?

A) 8.1%
B) 6.8%
C) 10.5%
D) 16.1%

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

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Question 33

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For Garrison Corporation,the working capital at the end of the current year is $10,000 more than the working capital at the end of the preceding year,reported as follows: Required: Has the current position improved? Explain.

Based on the above data,what is the quick ratio,rounded to one decimal point?

Gallant Company reported net income of $2,500,000.The income statement included one extraordinary item: a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations,both after applicable income tax. There were 100,000 shares of $10 par common stock and 40,000 shares 4% preferred stock of $100 par outstanding throughout the current year. Required: Prepare the earnings per share section of Gallant Company's income statement.

Income statement information for Lucy Company is provided below: Prepare a vertical analysis of the income statement for Lucy Company.

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as

The following data are taken from the financial statements:

Current position analysis indicates a company's ability to liquidate current liabilities.

Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo)as companies to each other?

A balance sheet that displays only component percentages is called

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

In 2012 Robert Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000.They had 50,000 shares of common stock outstanding during the entire year.Robert Corporation's common stock is selling for $50 per share on the New York Stock Exchange. Robert Corporation's price-earnings ratio is

From the following data for Norton Company for the year ended December 31,2012 prepare a multiple-step income statement.Show parenthetically earnings per share for the following: income from continuing operations,loss on discontinued operations (less applicable income tax),income before extraordinary item,extraordinary item (less applicable income tax),and net income. $\begin{array}{ll}\text { Common stock } \$ 50 \text { par } & \$ 200,000 \\\text { Cost of merchandise sold } & 342,000 \\\text { Administrative expenses } & 48,250 \\\text { Income tax (applicable to continuing operations) } & 142,000 \\\text { Interest expense } & 3,750\\\text { Loss on discontinued operations, }\\\text { net of applicable tax of } \$ 2,700 & 5,400 \\\text { Sales } & 865,000 \\\text { Selling expenses } & 83,000\\\text { Uninsured floodloss, net of applicable }\\\text { income tax of } \$ 4,500&14,000\end{array}$

The denominator of the rate of return on total assets ratio is the average total assets.

If a firm has a quick ratio of 1,the subsequent payment of an account payable will cause the ratio to increase.

Based on the above data,what is the amount of working capital?

In a company's annual report,the section called management discussion and analysis provides critical information in interpreting the financial statements and assessing the future of the company.

A 15% change in sales will result in a 15% change in net income.

Hsu Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $80,000.Hsu Company's times interest earned was