Question 1

Identify and explain the four building blocks of financial statement analysis.

Accepted Answer

The four usual building blocks of financ...

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

Standards for comparisons in financial statement analysis do not include:

Accepted Answer

A)  Intra-company standards.
B)  Competitors' standards.
C)  Industry standards.
D)  Management standards.
E)  Guidelines (rules of thumb) .F) D) and E)
G) B) and C)

Question 4

Horizontal analysis is used to reveal patterns in data covering successive periods.

Accepted Answer

A) True 
 B)False

Question 5

Financial information for Sigma Company is presented below. Calculate the following ratios for 2017:
(a) Inventory turnover.
(b) Accounts receivable turnover.
(c) Return on total assets.
(d) Times interest earned.
(e) Total asset turnover.

Accepted Answer

(a) Inventory turnover:
$123,000/[($61,0...

Question 6

The comparative income statements for Silverlight Company are shown below. Calculate the following ratios for 2017:
(a) profit margin
(b) gross margin
(c) times interest earned.

Accepted Answer

The answer of The comparative income statements for Silverlight Company...

Question 7

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

A) True 
 B)False

Question 8

_________________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Accepted Answer

Financial ...

Question 9

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

Accepted Answer

A) True 
 B)False

Question 10

Zhang Company reported Cost of goods sold of $835,000 and average Inventory of $41,750. The Inventory turnover ratio is:

Accepted Answer

A)  0.5 times.
B)  418 times.
C)  20 times.
D)  56 times.
E)  19 times.F) B) and C)
G) A) and E)

Question 11

Zhang Company reported Cost of goods sold of $835,000, beginning Inventory of $38,560 and ending Inventory of $41,750. The Days' sales in inventory (rounded to whole days)  is:

Accepted Answer

A)  18 days.
B)  418 days.
C)  21 days.
D)  56 days.
E)  22 days.F) B) and E)
G) None of the above

Question 12

Refer to the following selected financial information from McCormik, LLC. Compute the company's acid-test ratio for Year 2.

Accepted Answer

A)  2.26.
B)  1.98.
C)  2.95.
D)  3.05.
E)  1.88.F) None of the above
G) A) and B)

Question 13

Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2.

Accepted Answer

A)  $232,700.
B)  $220,600.
C)  $147,200.
D)  $111,700.
E)  $142,700.F) B) and C)
G) B) and E)

Question 14

Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

Accepted Answer

A) True 
 B)False

Question 15

Refer to the following selected financial information from McCormik, LLC. Compute the company's days' sales in inventory for Year 2.

Accepted Answer

A)  43.9.
B)  42.3.
C)  46.2.
D)  80.0.
E)  113.3.F) All of the above
G) C) and D)

Question 16

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.

Accepted Answer

A)  36.4% for 2017 and 41.1% for 2016.
B)  55.0% for 2017 and 56.0% for 2016.
C)  119.4% for 2017 and 100.0% for 2016.
D)  117.2% for 2017 and 100.0% for 2016.
E)  65.1% for 2017 and 56.0% for 2016.F) A) and D)
G) D) and E)

Question 17

Analysis of a single financial number is often of limited value.

Accepted Answer

A) True 
 B)False

Question 18

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

Accepted Answer

A) True 
 B)False

Question 19

The market price of Horokhiv Corporation's common stock at the end of the fiscal year 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The dividend yield ratio for 2016 is:

Accepted Answer

A)  14.5%.
B)  7.4%.
C)  6.5%.
D)  144.8%.
E)  6.9%.F) A) and C)
G) C) and D)

Question 20

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its debt to equity ratio is:

Accepted Answer

A)  0.42
B)  0.58
C)  1.38
D)  0.73
E)  1.00F) B) and C)
G) D) and E)

Exam 13: Analyzing and Interpreting Financial Statements

_________________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Correct AnswerverifiedFinancial ...View AnswerShow Answer

Profitability is the ability to generate future revenues and meet long-term obligations.

Correct AnswerverifiedShow Answer

Identify and explain the four building blocks of financial statement analysis.

Correct AnswerverifiedThe four usual building blocks of financ...View AnswerShow Answer

Refer to the following selected financial information from McCormik, LLC. Compute the company's days' sales in inventory for Year 2.

Correct AnswerverifiedShow Answer

Zhang Company reported Cost of goods sold of $835,000 and average Inventory of $41,750. The Inventory turnover ratio is:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The comparative income statements for Silverlight Company are shown below. Calculate the following ratios for 2017: (a) profit margin (b) gross margin (c) times interest earned.

Correct AnswerverifiedShow Answer

Horizontal analysis is used to reveal patterns in data covering successive periods.

Correct AnswerverifiedShow Answer

Refer to the following selected financial information from McCormik, LLC. Compute the company's acid-test ratio for Year 2.

Correct AnswerverifiedShow Answer

The market price of Horokhiv Corporation's common stock at the end of the fiscal year 2016 was $47.50 and it declared and paid cash dividends of $3.28 per share. The dividend yield ratio for 2016 is:

Correct AnswerverifiedShow Answer

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 common size percentages for cost of goods sold using Net sales as the base.

Correct AnswerverifiedShow Answer

Financial information for Sigma Company is presented below. Calculate the following ratios for 2017: (a) Inventory turnover. (b) Accounts receivable turnover. (c) Return on total assets. (d) Times interest earned. (e) Total asset turnover.

Correct Answerverified(a) Inventory turnover:$123,000/[($61,0...View AnswerShow Answer

Standards for comparisons in financial statement analysis do not include:

Correct AnswerverifiedShow Answer

Zhang Company reported Cost of goods sold of $835,000, beginning Inventory of $38,560 and ending Inventory of $41,750. The Days' sales in inventory (rounded to whole days) is:

Correct AnswerverifiedShow Answer

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

Correct AnswerverifiedShow Answer

Rajan Company's most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its debt to equity ratio is:

Correct AnswerverifiedShow Answer

Horizontal analysis is the comparison of a company's financial condition and performance to a base amount.

Correct AnswerverifiedShow Answer

Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2.

Correct AnswerverifiedShow Answer

A good financial statement analysis report often includes the following sections: executive summary, analysis overview, evidential matter, assumptions, key factors, and inferences.

Correct AnswerverifiedShow Answer

Analysis of a single financial number is often of limited value.

Correct AnswerverifiedShow Answer

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Financial ...
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The four usual building blocks of financ...
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(a) Inventory turnover:
$123,000/[($61,0...
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