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Exam 13: Analysis of Financial Statements

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Question 81

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The comparison of a company's financial condition and performance across time is known as:

A) Horizontal analysis.
B) Vertical analysis.
C) Political analysis.
D) Fair value reporting.
E) Liquidation analysis.

F) A) and D)
G) C) and D)

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Question 82

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An example of a guideline (or rule of thumb) for comparison is the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

A) True
B) False

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Question 83

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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

Refer to the following selected financial information from Phantom, Corp. Compute the company's days' sales in inventory for Year 2. (Use 365 days a year.) $\begin{array}{lll}& \text { Year 2 } & \text { Year 1 } \\\text { Merchandise inventory } & 271,000 & 253,500 \\\text { Cost of goods sold }& 486,400 & 433,100\end{array}$

The key factors section of a financial statement analysis report includes both quantitative and qualitative indicators of company performance.

The standards for comparisons when interpreting measures from financial statement analysis include (1) ________, (2) ________, (3) ________, and (4) ________.

Information from a manufacturing company's current year income statement follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned. $\begin{array}{|l|r|}\hline \text { Sales } & \$ 850,000 \\\hline \text { Cost of goods sold } & 455,000 \\\hline \text { Gross profit } & \$ 395,000 \\\hline \text { Operating expenses } & 260,000 \\\hline \text { Operating income } & \$ 135,000 \\\hline \text { Interest expense } & 32,000 \\\hline \text { Income before taxes } & \$ 103,000 \\\hline \text { Income taxes expense } & 12,40 \\\hline \text { Net income } & \$ 90,600 \\\hline\end{array}$

Internal users of accounting information manage and operate the company.

Carducci Corporation reported net sales of $3.6 million and beginning total assets of $0.9 million and ending total assets of 1.3 million. The average total asset amount is:

The income level most likely to continue into the future is commonly referred to as ________.

Zhang Company reported Cost of goods sold of $835,000, ending Inventory of $41,750, and Net sales of $2,338,000. The Days' sales in inventory (rounded to whole days) is:

The percent change of a comparative financial statement item is computed by subtracting the base period amount from the analysis period amount, dividing the result by the base period amount and multiplying that result by 100.

Capital structure measures a company's ability to earn net income from sales.

Trend percentage is calculated by dividing ________ by ________ and multiplying the result by 100.

Current assets minus current liabilities is:

The debt ratio, the equity ratio, debt-to-equity ratio, and times interest earned are all ________ ratios.

Martinez Corporation reported net sales of $765,000, net income of $142,000, and total assets of $7,634,409. The profit margin is:

The ability to generate future revenues and meet long-term obligations is referred to as:

A brief focus on important analysis results and conclusions is usually included in which of the following sections of a financial statement analysis report:

A company's sales in Year 1 were $280,000, and its sales in Year 2 were $341,600. Using Year 1 as the base year, what is the sales trend percent for Year 2?