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Exam 17: Financial Statement Analysis

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Question 81

Multiple Choice

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Which of the following is required by the Sarbanes-Oxley Act of 2002?

A) A price-earnings ratio.
B) A report on internal control.
C) A vertical analysis.
D) A common-sized statement.

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

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Question 82

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The relationship of each asset item as a percent of total assets is an example of vertical analysis.

A) True
B) False

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Question 83

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In performing a vertical analysis, the base for cost of goods sold is

Those unusual items reported as deductions from income from continuing operations should be listed net of the related income tax.

Why would you compare or not compare Coca-Cola and Pepsi-Cola (PepsiCo) as companies to each other?

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

The numerator used to calculate accounts receivable turnover is

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the dividend yield for this company? Round your answer to one decimal point.

Match its definition with item.

A financial statement showing each item on the statement as a percentage of one key item on the statement is called common-sized financial statements.

The numerator of the rate earned on common stockholders' equity ratio is equal to

An extraordinary item must be either unusual in nature or infrequent in occurrence.

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.

The percentage analysis of increases and decreases in individual items in comparative financial statements is called

A company reports the following: Determine the company's earnings per share on common stock.

Unusual items affecting the prior period's income statement consist of errors and change in accounting principles.

The following information was taken from the financial statement of Fox Resources for December 31 of the current fiscal year: 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. Required: Calculate for the common stock: (1) earnings per share (2) the price-earnings ratio (3) the dividends per share and the dividend yield. Round to one decimal place except earnings per share, which should be rounded to two decimal places.

Under which of the following cases may a percentage change be computed?

The following items are reported on a company's balance sheet: Required: Determine (1) the current ratio and (2) the quick ratio. Round to one decimal place.

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.