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Exam 15: Financial Statement Analysis

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Question 71

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A company reports the following: Determine the a inventory turnover,and b number of days' sales in inventory.Round your answer to one decimal place.

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a. Inventory turnover = Cost of goods so...

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Question 72

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Corporate annual reports typically do not contain

A) management discussion and analysis
B) an SEC statement expressing an opinion
C) accompanying notes
D) an auditor's report

E) None of the above
F) A) and B)

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Question 73

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$\begin{array}{c}\text { Assets }\\\begin{array}{lr}\text { Cash and short-term investments } & \$ 30,000 \\\text { Accounts receivable net } & 20,000 \\\text { Inventory } & 15,000 \\\text { Property, plant, and equipment } & \underline {185,000} \\ \text { Total assets } & \underline {\$ 250,000} \\\end{array}\end{array}$ $\begin{array}{c}\text { Liabilities and Stockholders' Equity }\\\begin{array}{lr}\text { Current liablities } & \$ 45,000 \\\text { Long-term liabilities } & 70,000 \\\text { Stockholders' equity \_Common } & \underline {135,000} \\\text { Total liabilities and stockholders' equity } & \underline {\$ 250,000} \\\end{array}\end{array}$ $\begin{array}{c}\text { Income Statement}\\\begin{array}{lll}\text { Sales } \\\text { Cost of goods sold } \\\text { Gross margin } \\\text { Operating expense: } \\\text { Interest expense } \\\text { Net income }\end{array}\begin{array}{lll}\$ 85,000 \\45,000 \\\hline \$ 40,000 \\15,000 \\5,000 \\\hline \$ 20,000 \\\hline\end{array}\end{array}$ $\begin{array}{l}\begin{array}{lll} \text { Number of shares of common stock outstanding}\\ \text { Market price of common stock}\\ \text { Total dividends paid}\\ \text { Cash provided by operations}\\\end{array}\begin{array}{lll}6,000 \\\$ 20 \\\$ 9,000 \\\$ 30,000\end{array}\end{array}$ -What is the ratio of sales to total assets for Diane Company?

Horizontal analysis of comparative financial statements includes

If two companies have the same current ratio,their ability to pay short-term debt is the same.

Reporting unusual items separately on the income statement allows investors to isolate the effects of these items on income and cash flows.

The denominator of the rate of return on total assets ratio is the average total assets.

Which of the following is not included in the computation of the quick ratio?

Short-term creditors are typically most interested in analyzing a company's

A company reports the following: Determine the a accounts receivable turnover, and b number of days’ sales in receivables. Round your answer to one decimal place.

Unusual items affecting the current period's income statement consist of changes in accounting principles and discontinued operations.

For Garrison Corporation,the working capital at the end of the current year is $10,000 more than the working capital at the end of the preceding year , reported as follows: $\begin{array}{|l|r|r|}\hline & \underline{\text { Year } 2}{} & \underline{\text { Year } 1}{} \\\hline\text { Current assets: }\\\hline \text { Cash, marketable securities, and receivables } & \$ 80,000 & \$ 84,000 \\\hline \text { Inventories } & {120,000} & {66,000} \\\hline \text { Total current assets } & \$ 200,000 & \$ 150,000 \\\hline \text { Current liabilities } & \$ 100,000 & {60,000}\\\hline \text { Working capital } & \$ 100,000 & \$ 90,000 \\\hline\end{array}$ Has the current position of Garrison Corporation improved? Explain.

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability.The amount of working capital immediately after payment is

A common measure of liquidity is

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio,the management of the company has effectively used leverage.

A company reports the following: The company’s earnings per share on common stock is

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

When you are interpreting financial ratios,it is useful to compare a company's ratios to some form of standard.

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

A firm selling food should have higher inventory turnover rate than a firm selling office furniture.