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Exam 17: Financial Statement Analysis

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Question 1

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Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Ratio of liabilities to stockholders' equity

A) Assess the profitability of the assets
B) Assess how effectively assets are used
C) Indicate the ability to pay current liabilities
D) Indicate how much of the company is financed by debt and equity
E) Indicate instant debt-paying ability
F) Assess the profitability of the investment by common stockholders
G) Indicate future earnings prospects
H) Indicate the extent to which earnings are being distributed to common stockholders

I) B) and G)
J) A) and E)

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Question 2

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A company reports the following: Cost of goods sold....................$610,000 Average inventory.....................80,000? Determine the (a) inventory turnover and (b) number of days' sales in inventory. Round your answers to one decimal place.

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(a)Inventory Turnover = Cost of Goods So...

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Question 3

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Use this information for Kellman Company to answer the questions that follow. ​ The balance sheets at the end of each of the first two years of operations indicate the following: ​ $\text { Kellman Company }$ $\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$ -Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $20,000 for Year 2, and the market price of common shares is $30, what is the price-earnings ratio on common stock for Year 2? (Round intermediate calculation to two decimal places and final answers to one decimal place.)

CorpCo gathered the following information as of the end of the current fiscal year:​​ What is CorpCo's price-earnings ratio? Round your answer to one decimal place.

Horizontal analysis of comparative financial statements includes

Cash and accounts receivable for Adams Company are provided below.​ What is the amount and percentage of increase or decrease that would be shown with horizontal analysis?

The price-earnings ratio on common stock is calculated as

Match each definition that follows with the term (a-h) it defines. -A company's ability to make interest payments and repay debt at maturity

If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

An advantage of the current ratio is that it considers the makeup of the current assets.

The balance sheet for Seuss Company at the end of the current fiscal year indicated the following:?? $\begin{array}{lr}\text { Bonds payable, } 10 \% \text { (20-year term) } & \$ 5,000,000 \\\text { Preferred } 10 \% \text { stock, } \$ 100 \text { par } & 1,000,000 \\\text { Common stock, } \$ 10 \text { par } & 2,000,000\end{array}$ Income before income tax was $1,500,000, and income taxes were $200,000 for the current year. Cash dividends paid on common stock during the current year totaled $150,000. The common stock sells for $75 per share at the end of the year. ?Determine each of the following: (a)Times interest earned (b)Earnings per share on common stock (c)Price-earnings ratio (d)Dividends per share of common stock (e)Dividend yield?Round to one decimal place except earnings per share and dividends per share, which should be rounded to two decimal places.

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

Analyzing a company's performance should take into account conditions peculiar to the industry and the general economic conditions.

What type of analysis is indicated by the following?

Use the information below for Privett Company to answer the questions that follow. ​ $\begin{array}{l}\text { Privett Company }\\\begin{array} { l r } \text { Accounts payable } & \$ 30,000 \\\text { Accounts receivable } & 35,000 \\\text { Accrued liabilities } & 7,000 \\\text { Cash } & 25,000 \\\text { Intangible assets } & 40,000 \\\text { Inventory } & 72,000 \\\text { Long-term investments } & 100,000 \\\text { Long-term liabilities } & 75,000 \\\text { Marketable securities } & 36,000 \\\text { Notes payable (short-term) } & 20,000 \\\text { Property, plant, and equipment } & 400,000 \\\text { Prepaid expenses } & 2,000\end{array}\end{array}$ -Based on the data for Privett Company, what is the amount of quick assets?

Match each ratio that follows to its use (items a-h) . Items may be used more than once. -Working capital

In horizontal analysis, each item is expressed as a percentage of the

Which of the following items appear on the corporate income statement before income from continuing operations?

A company reports the following: Sales$2,520,000 Average total assets (excluding long-term investments)1,400,000? Determine the asset turnover ratio. Round your answer to one decimal place.

Use this information for Kellman Company to answer the questions that follow. ​ The balance sheets at the end of each of the first two years of operations indicate the following: ​ $\text { Kellman Company }$ $\begin{array}{lrr}&\text { Year } 2&\text { Year } 1\\\text { Total current assets } & \$ 600,000 & \$ 560,000 \\\text { Total investments } & 60,000 & 40,000 \\\text { Total property, plant, and equipment } & 900,000 & 700,000 \\\text { Total current liabilities } & 125,000 & 65,000 \\\text { Total long-term liabilities } & 350,000 & 250,000 \\\text { Preferred } 9 \% \text { stock, } \$ 100 \text { par } & 100,000 & 100,000 \\\text { Common stock, } \$ 10 \text { par } & 600,000 & 600,000 \\\text { Paid-in capital in excess of par-Common stock } & 75,000 & 75,000 \\\text { Retained earnings } & 310,000 & 210,000\end{array}$ -Using the balance sheets for Kellman Company, if net income is $250,000 and interest expense is $30,000 for Year 2, what are the earnings per share on common stock for Year 2?