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Exam 17: Financial Statement Analysis

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Question 21

True/False

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If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

A) True
B) False

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Question 22

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An analysis in which all the components of an income statement are expressed as a percentage of net sales is called

A) vertical analysis
B) horizontal analysis
C) liquidity analysis
D) solvency analysis

E) B) and C)
F) A) and D)

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Question 23

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A company reports the following income statement and balance sheet information for the current year: Determine the rate earned on total assets. Round your answer to one decimal place.

A 15% change in sales will result in a 15% change in net income.

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

The following items are reported on a company's balance sheet: Determine the (a) current ratio, and (b) quick ratio. Round your answer to one decimal place.

In computing the ratio of net sales to assets, long-term investments are excluded from average total assets.

The following information has been condensed from the December 31 balance sheets of Hanson Co.: Round your answers to two decimal place.

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Gallant Company reported net income of $2,500,000. The income statement included one extraordinary item: a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations, both after applicable income tax. There were 100,000 shares of $10 par common stock and 40,000 shares 4% preferred stock of $100 par outstanding throughout the current year. Required: Prepare the earnings per share section of Gallant Company's income statement.

Condensed data taken from the ledger of Joplin Company at December 31, 2012 and 2011, are as follows: Prepare a comparative balance sheet, with horizontal analysis, for December 31, 2012 and 2011. (Round percents to one decimal point.)

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $115,000 and interest expense is $30,000 for 2012, what is the rate earned on stockholders' equity for 2012 (round percent to one decimal point) ?

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Corporate annual reports typically do not contain which of the following?

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

Income statement information for Lucy Company is provided below: Prepare a vertical analysis of the income statement for Lucy Company.

The dividend yield rate is equal to the dividends per share divided by the par value per share of common stock.

The numerator of the rate earned on total assets ratio is equal to

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.