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Exam 13: Interpreting Financial Statements

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Question 81

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Vertical analysis is the comparison of a company's financial condition and performance through time.

A) True
B) False

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Question 82

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Comparative financial statements in which each amount is expressed as a percentage of a base amount and in which the base amount is expressed as 100% are called:

A) Comparative statements.
B) Common-size comparative statements.
C) General-purpose financial statements.
D) Base line statements.
E) Index statements.

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

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Question 83

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The "cumulative effect of a change in accounting principles" is shown below the extraordinary items section on the income statement.

A company's balance sheet and income statement accounts follow: What is the company's gross margin ratio for 2013?

A change in inventory reporting from LIFO to FIFO is:

A company has total assets of $5,600,482, common stock of $2,111,111, retained earnings of $1,058,473. What is the company's debt ratio?

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

The return on total assets ratio is a profitability measure.

The four building blocks of financial analysis are (1) ____________________, (2) __________________________, (3) ____________________ and (4) _____________________.

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

A company had a market price of $37.50 per share, earnings per share of $1.25, and dividends per share of $0.40. Its price-earnings ratio is equal to:

The following information is available for the McCartney Corporation: $\begin{array}{|l|r|}\hline \text { Sales } & \$ 750,000 \\\hline \text { Cost of goods sold } & 450,000 \\\hline \text { Gross profit } & 300,000 \\\hline \text { Operating income } & 85,000 \\\hline \text { Net income } & 42,000 \\\hline \text { Inventory, beginning-year } & 71,200 \\\hline \text { Inventory, end-of-year } & 48,800 \\\hline\end{array}$ Calculate the company's inventory turnover and its days' sales in inventory.

A company had a profit margin of 12%. If net income equaled $450,000 and average total assets equaled $600,500, how much were sales?

A company's sales in 2012 were $280,000 and its sales in 2013 were $341,600. Using 2012 as the base year, what is the sales trend percent for 2013?

A company has an inventory turnover ratio of 2.90, merchandise inventory for 2014 of $46,095, and cost of goods sold of $173,420. What is the average inventory?

Explain where the following item should appear in the financial statements of a corporation: One of the company's plants was destroyed by an earthquake. The area has never reported an earthquake. The amount of the loss, net of tax, was $850,000.

A company's balance sheet and income statement accounts follow: What is the company's times interest earned ratio for 2013?

Comparative statements for Kool Corporation are shown below: Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2012 as the base year.

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

The return on common stockholders' equity measures a company's success in reaching the goal of earning net income for its owners.