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Exam 13: Measuring and Evaluating Financial Performance

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Question 21

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Match each term with the appropriate definition.Not all definitions will be used. -Vertical Analysis

A) Also known as time-series analysis.
B) The ability of a company to meet its short-run financial obligations.
C) The standard that companies should present all relevant information needed to interpret a company's financial position and performance.
D) A measure of current earnings performance.
E) Measures that relate financial variables reported in one or more of the financial statements from the same year.
F) A type of analysis that focuses on relationships within a single financial statement.
G) A result from comparing a company's results to other companies in the industry.
H) The standard that revenue should be recorded when earned,provided payment is reasonably expected.
I) A measure of long-run survivability.
J) The standard that expenses should be recognized when incurred.
K) The characteristic that financial information needs to be valuable to decision makers.
L) The standard that takes for granted a company's near term financial survival.

M) B) and C)
N) H) and I)

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Question 22

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An increase in the gross profit percentage indicates that:

A) cost of goods sold as a percentage of sales has decreased.
B) cost of goods sold as a percentage of sales has increased.
C) operating expenses as a percentage of sales have increased.
D) operating expenses as a percentage of sales have decreased.

E) C) and D)
F) None of the above

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Question 23

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Which of these are solvency ratios?

Which of the following actions would likely increase the Return on Equity (ROE) ?

A current ratio of less than one is not so much of a concern when the company has a:

Which of these ratios measure liquidity?

Which of the following ratios is used to evaluate a company's liquidity?

Which of the measures below is used to assess profitability?

If net income is rising,but net sales revenue and the gross profit percentage remain the same,then:

Melrose Manufacturing has net sales revenue of $624,000,cost of goods sold of $274,560,net income of $95,360,and preferred dividends of $8,000 during the current year.At the beginning of the year,402,400 shares of common stock were outstanding,and,at the end of the year,429,600 shares of common stock were outstanding.A total of 1,000 preferred shares were outstanding throughout the year.The company's earnings per share for the current year is closest to:

Stockton Co.prepared its income statement containing the information below.Using vertical analysis,what percentages would apply to cost of sales,gross profit,and interest expense,respectively? $\begin{array}{lr}\text { Net Sales Revenue } & \$ 508,000 \\\text { Cost of Sales } & 328,000 \\\text { Gross Profit } & 180,000 \\\text { Operating and Other Expenses } & 65,200 \\\text { Interest Expense } & 20,400 \\\text { Income Tax Expense } & 25,600 \\\text { Net Income } & \$ 68,800\end{array}$ $\begin{array}{lrrr}&\text { Cost of Sales}&\text {Gross Profit }&\text {Interest Expense }\\\text { A) } & 182.2 \% & 100.6 \% & 14.2 \% \\\text { B) } & 476.7 \% & 261.6 \% & 37.2 \% \\\text { C) } & 100.0 \% & 54.9 \% & 7.8 \% \\\text { D) } & 64.6 \% & 35.4 \% & 4.0 \%\end{array}$

The following information is taken from the financial statements of Clybourn Company for the current year: $\begin{array}{lr}\text { Current Assets } & \$ 32,000 \\\text { Total Assets } & 1,424,000 \\\text { Cost of Goods Sold } & 1,040,000 \\\text { Gross Profit } & 320,000 \\\text { Net Income } & 192,000\end{array}$ On a common size income statement for the year,what is the percentage that would be shown next to the dollar amount of sales revenue?

A decrease in receivables turnover ratio is indicative of:

The lower the receivables turnover,the slower accounts receivable are being collected.

To analyze changes in a company's net income over the last ten years,you should perform:

The general goal of horizontal analyses is to identify significant trends.

If the debt-to-assets ratio is 0.73,it means that 73% of the company's financing has been provided by stockholders' equity.

Which of the following is not a profitability ratio?

Match each term with the appropriate definition.Not all definitions will be used. -Going-Concern Assumption

The full disclosure principle refers to: