FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 23: Financial Statement Analysis

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 21

True/False

Review LaterAdd Note

Review Later

The ability of a company to pay its debts when due is known as liquidity.

A) True
B) False

Correct Answer

verified

Show Answer

Question 22

True/False

Review LaterAdd Note

Review Later

In horizontal analysis, the base year is the most recent year.

A) True
B) False

Correct Answer

verified

Show Answer

Question 23

Essay

Review LaterAdd Note

-Using the information given, discuss Lee Corporation's standing when compared to the industry averages.

What is the PE ratio? How is it calculated and why is it that the PE ratio for a privately held company often cannot be calculated?

A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with

If the ratio of total stockholders' equity to total assets was greater in 2013 than in 2012, then

The following financial information was taken from a firm's accounting records on December 31, 2013. Use this information to determine the items below. $\begin{array}{ll}\text { Cash } & \$ 40,000 \\\text { Accounts Receivable (Net) } & 160,000 \\\text { Merchandise Inventory } & 310,000 \\\text { Property, Plant, and Equipment (Net) } & 400,000 \\\text { Accounts Payable } & 120,000 \\\text { Bonds Payable, 2025 } & 100,000\end{array}$ (1) Working capital. (2) Current ratio. (3) Acid-test ratio

A company had income of $180,000 in 2012 and $240,000 in 2013. The increase in retained earnings from 2012 to 2013 is

When horizontal analysis is performed, no percentage change is computed for a given item if there is no balance for that item in the base year.

A high ratio of stockholders' equity to total liabilities indicates a greater risk for creditors.

Which of the following is not true of vertical analysis?

Percentages of a base amount rather than dollar amounts are given for the items on ____________________ statements.

The following financial information was taken from a firm's accounting records for 2013. Use this information to determine the items below. $\begin{array}{lrr} & \text { Jan. 1 } & \text { Dec. 31 } \\\text { Accounts Receivable } & \$ 208,000 & \$ 218,000 \\\text { Merchandise Inventory } & 245,000 & 255,000 \\\text { Net Credit Sales } & & 2,300,000 \\\text { Cost of Goods Sold } & & 1,200,000\end{array}$ (1) Inventory turnover. (2) Accounts receivable turnover. (3) Average collection period of accounts receivable.

If the cost of goods sold is 65 percent of net sales, then gross profit on sales must be ____________________ percent of net sales.

-Using the information shown, prepare a horizontal analysis. Carry all calculations to two decimal places and then round to one decimal place.

If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2012 to 2013, the firm used

In horizontal analysis, the earlier period is called the ____________________ period.

Selected ratios for Julienne Foods, Inc. and Brut Champagnes, Inc. are given. What do these ratios tell you about the companies regarding whether or not to invest in either of them and what additional information might be helpful in that decision? $\begin{array} { l c c } & \text { Julienne Foods } & \text { Brut Champagnes } \\\text { Working Capital } & 236,000 & 672,000 \\\text { Current Ratio } & 2.3 & 1.9 \\\text { Inventory Turnover } & 3.8 & 5.3 \\\text { Accounts Receivable Turnover } & 3.6 & 4.9 \\\text { Average Collection Period } & 23.9 & 28.7\end{array}$

The following financial information was taken from a firm's accounting records on December 31, 2013. Use this information to determine the items below. $\begin{array}{lr}\text { Net Sales } & \$ 800,000 \\\text { Income Tax Expense } & 8,000 \\\text { Net Income After Income Tax } & 40,000 \\\text { Common Stock ( } \$ 25 \text { par value) } & 200,000 \\\text { Retained Earnings } & 220,000\end{array}$ Cash dividends of $22,000 were paid on the common stock in 2013. Market price of the common stock on December 31 was $50. (1) Rate of return on common stockholders' equity. (2) Earnings per share of common stock. (3) Price-earnings ratio. (4) Yield on common stock.

-Using the information given, discuss J & S Partnership's outcomes compared to the industry averages.