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Exam 14: Financial Statement Analysis

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Question 41

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Corporate annual reports typically do not contain

A) management discussion and analysis
B) an SEC statement expressing an opinion
C) accompanying notes
D) an auditor's report

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

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Question 42

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The following data are taken from the financial statements: (a) Determine for each year: (1) the inventory turnover, round answer to one decimal place. (2) the number of days' sales in inventory. Round intermediate calculations to two decimal places and the final answer to whole number. (b) Comment on the favorable and unfavorable trends revealed by the data.

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(a)
(b) Sales decreased whil...

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Question 43

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Reporting unusual items separately on the income statement allows investors to isolate the effects of these items on income and cash flows.

Short-term creditors are typically most interested in analyzing a company's

An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.

Assume the following sales data for a company: What is the percentage increase in sales from the preceding year to the current year?

A company reports the following: Determine: (a) accounts receivable turnover (b) number of days' sales in receivables. Round your answer to one decimal place.

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the price earnings ratio for Diane Company?

From the following data for Norton Company for the year ended December 31, prepare a multiple-step income statement. Show earnings per share for the following: income from continuing operations, loss on discontinued operations (less applicable income tax), income before extraordinary item, extraordinary item (less applicable income tax), and net income.

Which of the following is not included in the computation of the quick ratio?

Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory  management.

Unusual items affecting the prior period's income statement consist of errors and changes in accounting principles.

A balance sheet that displays only component percentages is a

The balance sheets at the end of each of the first two years of operations indicate the following: 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.)

Gallant Company reported net income of $2,500,000.  The income statement included a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations, both after applicable income tax.  There were 100,000 shares of $10 par common stock and 40,000 shares of 4% preferred stock of $100 par outstanding throughout the current year.   Prepare the earnings per share section of Gallant Company's income statement.

The relationship of each asset item as a percent of total assets is an example of vertical analysis.

Earnings per share amounts are only required to be presented for income from continuing operations and net income on the face of the statement.

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability.  As a result of this transaction, the current ratio and working capital will

A company can use comparisons of its financial data to the data of other companies and industry averages to evaluate its position.

A company reports the following: Determine the ratio of sales to assets.   Round your answer to one decimal place.