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Exam 17: Financial Statement Analysis

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Question 21

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The following information pertains to Brock Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for this company?

A) 1.42
B) 0.78
C) 1.58
D) 0.67

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

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Question 22

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The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

A) True
B) False

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Question 23

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The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

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.

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

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 total assets for 2012 (round percent to one decimal point) ?

The number of times interest expense is earned is computed as

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

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?

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

The following information pertains to Auburn Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.

When computing the rate earned on total common stockholders' equity, preferred stock dividends are subtracted from net income.

Factors which reflect the ability of a business to pay its debts and earn a reasonable amount of income are referred to as solvency and profitability.

Earnings per share amounts are only required to be presented for income from continuing operations and net income on the face of the statement.

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.

The following information is available for Taylor Company: Which of the following statements is correct?

Horizontal analysis of comparative financial statements includes the

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

Based on the above data, what is the amount of working capital?

A balance sheet that displays only component percentages is called