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Exam 13: Analysis of Financial Statements

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Question 111

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Explain the purpose of financial statement analysis for both external and internal users.

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The purpose of financial statement analy...

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Question 112

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Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory.The acid-test (quick) ratio is:

A) 1.4:1.
B) 0.77:1.
C) 0.54:1.
D) 1:1.
E) 0.64:1.

F) C) and D)
G) B) and E)

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Question 113

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Net income divided by average total assets is:

Carducci Corporation reported Net sales of $3.6 million and average Total assets of $1.1 million.The Total asset turnover is:

Financial statement analysis involves all of the following except:

In order to be classified as an extraordinary gain or loss,the item must be both (1)________ and (2)________.

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

$\begin{array} { | l | r | r | } \hline &{ \text { Year 2 } } & { \text { Year 1 } } \\\hline \text { Total assets } & \$ 327,800 & \$ 301,000 \\\hline \text { Total liabilities } & 171,400 & 169,300 \\\hline \text { Total equity } & 156,400 & 131,700 \\\hline\end{array}$ -Refer to the following selected financial information from Keller Company.Compute the company's debt to equity for Year 2.

$\begin{array} { | l | r | r | } \hline&{ \text { Year 2 } } & { \text { Year 1 } } \\\hline \text { Cash } & \$ 37,500 & 36,850 \\\hline \text { Short-term investments } & 90,000 & 90,000 \\\hline \text { Accounts receivable, net } & 85,500 & 86,250 \\\hline \text { Merchandise inventory } & 121,000 & 117,000 \\\hline \text { Prepaid expenses } & 12,100& 13,500 \\\hline \text { Plant assets } & 388,000 & 392,000 \\\hline \text { Accounts payable } & 113,400 & 111.750 \\\hline \text { Net sales } & 711,000 & 706,000 \\\hline \text { Cost of goods sold } & 390,000 & 385,500 \\\hline\end{array}$ -Refer to the following selected financial information from McCormik,LLC.Compute the company's working capital for Year 2.

Guidelines (rules-of-thumb) are general standards of comparison developed from:

$\begin{array} { | l | r | r | } \hline & { \text { Year 2 } } &{ \text { Year 1 } } \\\hline \text { Accounts receivable, net } & 86,500 & 82,750 \\\hline \text { Net sales } & 723,000 & 693,000 \\\hline\end{array}$ -Refer to the following selected financial information from Marston Company.Compute the company's accounts receivable turnover for Year 2.

Calculate the percent increase or decrease for each of the following financial statement items: $\begin{array} { | l | r | r | } \hline & \text { Year } 2 & { \text { Year } 1 } \\\hline \text { Cash } & \$ 37,500 & \$ 30,000 \\\hline \text { Accounts receivable } & 63,000 & 52,500 \\\hline \text { Inventory } & 67,500 & 90,000 \\\hline \text { Accounts payable } & 35,100 & 27,000 \\\hline \text { Sales } & 187,500 & 150,000 \\\hline \text { Equipment } 65,00 & 10 & 125,000 \\\hline\end{array}$

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

Match each of the following terms with the appropriate definitions. -A measure of solvency presented as the ratio of total liabilities to total equity.

Financial reporting refers to:

The common-size percent is computed by:

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

Use the following selected information from Wheeler,LLC to determine the 2017 and 2016 trend percentages for cost of goods sold using 2016 as the base. $\begin{array}{|l|r|r|}\hline&2017&2016\\\hline \text { Net sales } & \$ 276,200 & \$ 231,400 \\\hline \text { Cost of goods sold } & 151,900 & 129,590 \\\hline \text { Operating expenses } & 55,240 & 53,240 \\\hline \text { Net earnings } & 27,820 & 19,820\\\hline\end{array}$

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

Financial statement analysis applies analytical tools to financial statements and related data for making business decisions.