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Exam 14: Financial Statement Analysis

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Question 1

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Data from Kempen Corporation's most recent balance sheet and the company's income statement appear below: -The times interest earned for Year 2 is closest to:

A) 3.45
B) 6.36
C) 4.45
D) 2.42

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

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Question 2

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Financial leverage is negative when:

A) the return on total assets is less than the rate of return on common stockholders' equity.
B) total liabilities are less than stockholders' equity.
C) total liabilities are less than total assets.
D) the return on total assets is less than the rate of return demanded by creditors.

E) A) and D)
F) B) and D)

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Question 3

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Financial statements for Orange Company appear below: Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $100. -Orange Company's average sale period for Year 2 was closest to:

Hick Corporation's most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $60 thousand. Dividends on preferred stock totaled $20 thousand. The market price of common stock at the end of Year 2 was $9.57 per share. -The dividend payout ratio for Year 2 is closest to:

Financial statements for Orange Company appear below: Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $100. -Orange Company's return on total assets for Year 2 was closest to:

Financial statements for Orange Company appear below: Dividends during Year 2 totaled $156 thousand, of which $18 thousand were preferred dividends. The market price of a share of common stock on December 31, Year 2 was $100. -Orange Company's current ratio at the end of Year 2 was closest to:

Dieringer Corporation's most recent balance sheet and income statement appear below: -The average sale period for Year 2 is closest to:

Pettengill Corporation's net operating income last year was $280,000;its interest expense was $37,000;its total stockholders' equity was $920,000;and its total liabilities were $620,000. Required: Compute the following for Year 2: a.Times interest earned. b.Debt-to-equity ratio.

Financial statements for Marcell Company appear below: -Marcell Company's accounts receivable turnover for Year 2 was closest to:

If a company's return on assets is substantially higher than its cost of borrowing,then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

The gross margin percentage is computed by dividing the gross margin by sales.

Data from Paynter Corporation's most recent balance sheet appear below: A total of 100,000 shares of common stock and 20,000 shares of preferred stock were outstanding at the end of the year. Required: Compute the book value per share.Show your work!

Park Company purchased $100,000 in inventory from its suppliers,on account.The company's acid-test ratio would:

The formula for the gross margin percentage is:

Dieringer Corporation's most recent balance sheet and income statement appear below: -The average collection period for Year 2 is closest to:

The gross margin percentage is most likely to be used to assess:

Excerpts from Zorra Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,370 and the cost of goods sold was $850. -The current ratio at the end of Year 2 is closest to:

Excerpts from Tigner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,230 and the cost of goods sold was $820. -The accounts receivable turnover for Year 2 is closest to:

Wolbers Company has an acid-test ratio of 1.4.Which of the following events will cause this ratio to decrease?

Condensed financial statements for Pardin Company are given below: Pardin Company Statement of Financial Position As of December 31 The company paid total dividends of $100,000 during the year.At the end of Year 2,the company's common stock was selling for $38 per share. Required: On the basis of the information given above,fill in the blanks with the appropriate figures: Example: The current ratio at the end of Year 2 would be computed by dividing $1,080,000 by $400,000. a.The acid-test ratio at the end of Year 2 would be computed by dividing _______________ by _________________. b.The accounts receivable turnover during Year 2 would be computed by dividing _______________ by _________________. c.The inventory turnover during Year 2 would be computed by dividing _______________ by _________________. d.The times interest earned for Year 2 would be computed by dividing _______________ by _________________. e.The earnings per share of common stock for Year 2 would be computed by dividing _______________ by _________________. f.The return on total assets for Year 2 would be computed by dividing _______________ by _________________. g.The debt-to-equity ratio at the end of Year 2 would be computed by dividing _______________ by _________________. h.The dividend yield ratio would be computed by dividing _______________ by _________________. i.The return on common stockholders' equity for Year 2 would be computed by dividing _______________ by _________________. j.Whether the common stockholders gained or lost from the use of financial leverage during Year 2 would be determined by comparing the ratio computed in question ___ above to the ratio computed in question above ____.In this case,financial leverage is (positive/negative)___________________.