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Exam 17: Analysis of Financial Statements

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Question 31

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Express the following balance sheets for Alberts Company in common-size percents.

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Question 32

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Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

A) Asset comparative statements.
B) Percentage comparative statements.
C) Common-size comparative statements.
D) Sales comparative statements.
E) General-purpose financial statements.

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

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Question 33

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Express the following income statement information in common-size percents and in trend percents using 2011 as the base year.

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals 7.85%. ($14,000/$178,300) x 100 = 7.85%

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount, and in which the base amount is expressed as 100%, are called:

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

Financial information for Omega Corporation is presented below. Calculate the following ratios for 2012: (a) Inventory turnover. (b) Accounts receivable turnover. (c) Return on total assets. (d) Times interest earned. (e) Total asset turnover.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year. At year-end, the price per share of the company's shares was $49.40. What is the company's year-end price-earnings ratio?

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

______________________________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio equals:

Phoenix Company reported sales of $400,000 for Year 1, $450,000 for Year 2, and $500,000 for Year 3. Using Year 1 as the base year, what were the percentage increases for Year 2 and Year 3 compared to the base year?

Financial statement analysis:

For the following financial statement items, calculate trend percents using 2009 as the base year:

Trend analysis is also called:

Information from a manufacturing company's current year income statement is as follows. Calculate the company's (a) profit margin ratio, (b) gross margin ratio, and (c) times interest earned.

Trend percentage is calculated by dividing _________________________ by ___________________________ and multiplying the result by 100.

The ability to provide financial rewards sufficient to attract and retain financing is called:

Identify and describe three common tools of financial statement analysis.

The following summaries from the income statements and balance sheets of Neeko, Inc. and Saxony, Inc. are presented below. (1) For both companies for 2012, compute the (a) Current ratio (b) Acid-test ratio (c) Accounts receivable turnover (d) Inventory turnover (e) Days' sales in inventory (f) Days' sales uncollected Which company do you consider to be the better short-term credit risk? Explain. (2) For both companies for 2012, compute the (a) Profit margin ratio (b) Return on total assets (c) Return on ordinary shareholders'equity Which company do you consider to have better profitability ratios?