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Exam 17: Analysis of Financial Statements

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Question 51

True/False

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The percent change is computed by subtracting the analysis period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.

A) True
B) False

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Question 52

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

A) Days' sales uncollected.
B) Average accounts receivable ratio.
C) Current ratio.
D) Profit margin.
E) Accounts receivable turnover ratio.

F) C) and D)
G) A) and E)

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Question 53

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The debt ratio, the equity ratio, pledged assets to secured liabilities, and times interest earned are all ___________________ ratios.

Comparative calendar year financial data for a company are shown below. Calculate the following ratios for 2012: (a) return on total assets. (b) return on ordinary shareholders' equity.

The return on total assets can be calculated as profit margin times total asset turnover.

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

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

Financial reporting refers to:

Evaluation of company performance does not include analysis of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

_______________ are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

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 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 ordinary shareholders'equity. (e) basic earnings per share. (f) price earnings ratio. (g) dividend yield.

Describe the purpose of vertical financial statement analysis and how it is applied.

Profitability is the ability to generate future revenues and meet long-term obligations.

Annual cash dividends per share divided by market price per share is the:

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Calculate the percent increases for each of the following selected balance sheet items.

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 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) debt ratio (b) equity ratio (c) debt-to-equity ratio (d) times interest earned (e) total asset turnover

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Refer to the following selected financial information from Fennie's, LLC. Compute the company's days' sales uncollected for Year 2.