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Exam 17: Financial Statement Analysis

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Question 71

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Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

A) True
B) False

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Question 72

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The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

A) True
B) False

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Question 73

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Define solvency and profitability. How are they alike?

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Return on total assets

A company can compare its financial data to the data of other companies and industry averages to evaluate its position.

Percentage analyses, ratios, turnovers, and other measures of financial position and operating results are

Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.

Hsu Company reported the following on its income statement:?? $\begin{array} { l r } \text { Income before income taxes } & \$ 420,000 \\\text { Income tax expense } & 120,000 \\\text { Net income } & \mathbf { \$ 30 0 , 0 0 0 }\end{array}$ Interest expense was $80,000. Hsu Company's times interest earned ratio is

Which of the following is required by the Sarbanes-Oxley Act?

The following information has been condensed from the December 31 balance sheets of Gabriel Co.:? (a)Determine the ratio of fixed assets to long-term liabilities for each year. (b)Determine the ratio of liabilities to stockholders' equity for each year. (c)Comment on the year-to-year changes for both ratios.?Round your answers to two decimal places.

The following information was taken from the financial statement of Fox Resources for December 31 of the current fiscal year:?Common stock, $20 par value (no change during the year)$5,000,000Preferred 10% stock, $40 par (no change during the year)2,000,000?The net income was $600,000, and the declared dividends on the common stock were $125,000 for the current year. The market price of the common stock is $20 per share.Calculate for the common stock: (a) Earnings per share (b) Price-earnings ratio (c) Dividends per share and dividend yield?Round to one decimal place except earnings per share, which should be rounded to two decimal places.

The following information pertains to Dallas Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.​​ What is the return on stockholders' equity?

The following data are taken from the balance sheet at the end of the current year:?? $\begin{array} { l r } \text { Cash } & \$ 154,000 \\\text { Accounts receivable } & 210,000 \\\text { Inventory } & 240,000 \\\text { Prepaid expenses } & 15,000 \\\text { Temporary investments } & 350,000 \\\text { Property, plant, and equipment } & 375,000 \\\text { Accounts payable } & 245,000 \\\text { Accrued liabilities } & 4,000 \\\text { Income tax payable } & 10,000 \\\text { Notes payable, short-term } & 85,000\end{array}$ Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Round ratios to one decimal place.

Factors that reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency, profitability, and liquidity.

The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.​​ What is the return on total assets for this company?

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. Use this information to answer the questions that follow. ​ -Using the data provided for Diane Company, what is the asset turnover?

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

Which of the following is considered an unusual item affecting the prior period's income statement?

Which of the following items should be classified as an unusual item on an income statement?

The purpose of an audit is to