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Exam 23: Financial Statement Analysis

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Question 1

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Current assets divided by current liabilities is the---------- .

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Question 2

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Because the number of shares of common stock outstanding during the year can fluctuate, computing return on common stockholders' equity is not a useful indicator of profitability.

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Question 3

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The current ratio is a measure of the ability of a company to pay its currently maturing debts, which is also known as------------- .

Using the comparative income statement given below, prepare a horizontal analysis of all items. Carry all calculations to two decimal places and then round to one decimal place.

The excess of current assets minus current liabilities is known as----------- .

A firm has current liabilities of $60,000, stockholders' equity of $180,000 and total assets of $300,000. The percentage of total liabilities to total assets is:

If long-term liabilities are $62,000 and total assets are $480,000, what percentage of total assets are long-term liabilities?

In a vertical analysis of the income statement data, the cost of goods sold most likely would be expressed as a percentage of:

The price-earnings ratio compares the present market value of a corporation's common stock with the earnings per share of that stock.

All of the following are shortcomings of financial statement analyses except:

Where the current ratio measures a company's ability to pay its current debts using current assets on a dollar for dollar basis, working capital provides a similar measure by providing the actual margin of security afforded to short-term creditors.

Cost of goods sold divided by average inventory equals the----------- .

Liquidity is the ability of a company to pay its debts when due.

The following financial information was taken from a firm's accounting records on December 31, 2019. Use this information to determine the items below. $\begin{array}{ll}\text { Cash } & \$ 56,000 \\\text { Accounts Receivable (Net) } & 191,000 \\\text { Merchandise Inventory } & 362,000 \\\text { Property, Plant, and Equipment (Net) } & 454,000 \\\text { Accounts Payable } & 139,000 \\\text { Bonds Payable, 2028 } & 160,000\end{array}$ (1.) Working capital (2.) Current ratio (3.) Acid-test ratio

What is the PE ratio? How is it calculated and why is it that the PE ratio for a privately held company often cannot be calculated?

Ratios provide useful, stand-alone tools to assess management performance and improvement efforts.

In horizontal analysis, the earlier period is called the ----------period.

Trend analysis looks at:

In 2019, net sales were $672,000 and cost of goods sold was $450,000. In 2018, net sales amounted to $600,000 and cost of goods sold was $400,000. In a comparative income statement, using vertical analysis, the 12% increase in net sales will be presented in the percentage column.

The following financial information was taken from a firm's accounting records on December 31, 2019. Use this information to determine the items below. $\begin{array}{ll}\text { Cash } & \$ 55,000 \\\text { Accounts Receivable (Net) } & 140,000 \\\text { Merchandise Inventory } & 265,000 \\\text { Property, Plant, and Equipment (Net) } & 500,000 \\\text { Total Assets } & 960,000 \\\text { Accounts Payable } & 120,000 \\\text { Bonds Payable, 2028 } & 400,000 \\\text { Total Liabilities } & 520,000\end{array}$ (1.) Working capital (2.) Current ratio (3.) Acid-test ratio (4.) Ratio of stockholders' equity to total liabilities