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Exam 17: Analysis of Financial Statements

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Question 41

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The base amount for a common-size balance sheet is usually total assets.

A) True
B) False

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Question 42

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How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:

A) Accounts receivable turnover.
B) Inventory turnover.
C) Days' sales uncollected.
D) Current ratio.
E) Price earnings ratio.

F) None of the above
G) A) and B)

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Question 43

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If a company is comparing its financial condition or performance to a base amount,it is using vertical analysis.

Net sales divided by Average accounts receivable,net is the:

Working capital is computed as current liabilities minus current assets.

A company's calendar-year financial data are shown below.The company had total assets of $339,000 and total equity of $144,400 for the prior year.No additional shares of common stock were issued during the year.The December 31 market price per share is $49.50.Cash dividends of $19,500 were paid during the year.Calculate the following ratios for the company: (a)profit margin ratio (b)gross margin ratio (c)return on total assets (d)return on common stockholders' equity (e)book value per common share (f)basic earnings per share (g)price earnings ratio (h)dividend yield.

The return on total assets ratio is a profitability measure.

A rough guideline states that for a company with no discounts offered,days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

Comparative financial statements are reports that show financial amounts in side by side columns on a single statement for analysis purposes.

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.

______________________ ratios include the price-earnings ratio and dividend yield.

Which of the following items is not likely an extraordinary item?

The evaluation of company performance and financial condition includes evaluation of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

Refer to the following selected financial information from McCormik,LLC.Compute the company's acid-test ratio for Year 2.

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

The comparison of a company's financial condition and performance across time is known as:

The market price of Horokhiv Corporation's common stock at the start of 2014 was $47.50 and it declared and paid cash dividends of $3.28 per share.The Dividend yield ratio is:

Current assets divided by current liabilities is the:

Refer to the following selected financial information from McCormik,LLC.Compute the company's current ratio for Year 2.