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Exam 17: Analysis of Financial Statements

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Question 61

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Selected current year company information follows: Total shareholders' equity, beginning-year.. 198,935 Total shareholders' equity, end-of-year…… 121,851 The total asset turnover is:

A) 2.24 times
B) 2.81 times
C) 3.64 times
D) 4.67 times
E) 6.28 times

F) C) and E)
G) B) and D)

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Question 62

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Financial analysis only refers to the communication of relevant financial information to decision makers.

A) True
B) False

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Question 63

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A good financial statement analysis report usually includes the following six sections: (1) ______________________, (2) ____________________, (3) _______________, (4) __________________ (5) __________________, and (6) ____________________.

Identify and explain the four building blocks of financial statement analysis.

Calculate the percent increase or decrease for each of the following financial statement items:

Quick assets divided by current liabilities is the:

Analysis of a single financial number is often of limited value.

The ability to meet short-term obligations and to efficiently generate revenues is called:

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

Dividing accounts receivable, net by net sales and multiplying the result by 365 is the:

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

Vertical analysis is a tool to evaluate individual financial statement items or groups of items in terms of a specific base amount.

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

A ratio expresses a mathematical relation between two quantities and can be expressed as a percent, rate, or proportion.

The comparison of a company's financial condition and performance to a base amount is known as:

Total asset turnover reflects a company's ability to use its assets to generate sales and is an important indication of operating efficiency.

The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.

____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount.

Use the following selected information from Farris, LLC to determine the Year 2 and Year 1 common size percents for operating expenses using Year 1 net sales as the base.

Dividing ending inventory by cost of goods sold and multiplying the result by 365 is the: