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Exam 15: Financial Statement Analysis

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Question 21

True/False

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Buying inventory in large lots to take advantage of quantity discounts can be responsible for a high inventory turnover ratio.

A) True
B) False

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Question 22

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A company's current ratio is greater than 1.Purchasing raw materials on credit would:

A) increase the current ratio.
B) decrease the current ratio.
C) increase working capital.
D) decrease working capital.

E) B) and C)
F) A) and B)

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Question 23

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Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: $\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \\\text { Cash}&\$ 74,000 & \$ 130,000 \\\text { Accounts receivable, net}&\$ 255,000 & \$ 240,000 \\\text {Inventory. }&\$ 173,000 & \$ 180,000 \\\text {Total current assets }&\$ 564,000 & \$ 610,000 \\\text {Total assets. }&\$ 1,350,000 & \$ 1,330,000 \\\text {Accounts payable }&\$ 170,000 & \$ 160,000 \\\text {Total liabilities }&\$ 633,000 & \$ 620,000 \\\text {Total stockholders' equity. }&\$ 717,000 & \$ 710,000 \\\text {Sales (all on account) }&\$ 1,290,000 & \\\text {Cost of goods sold }&\$ 700,000 &\end{array}$ -The company's inventory turnover for Year 2 is closest to:

Sapien Corporation has provided the following data for the most recent year: $\begin{array}{lr}\text {Sales }&\$1,340,000\\\text {Gross margin. }&\$460,000\\\text {Net operating income. }&\$54,846\\\text {Net income before taxes }&\$41,846\\\text {Net income. }&\$27,200\\\end{array}$ The company's gross margin percentage is closest to:

Fongeallaz Corporation's income statement for Year 2 appears below: The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Hagle Corporation has provided the following financial data: Required: a.What is the company's accounts receivable turnover for Year 2? b.What is the company's average collection period for Year 2? c.What is the company's inventory turnover for Year 2? d.What is the company's average sale period for Year 2? e.What is the company's operating cycle for Year 2? f.What is the company's total asset turnover for Year 2?

Tobia Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $6,300.The market price of common stock at the end of Year 2 was $1.78 per share. Required: a.What is the company's times interest earned ratio for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's earnings per share for Year 2? e.What is the company's price-earnings ratio for Year 2? f.What is the company's dividend payout ratio for Year 2? g.What is the company's dividend yield ratio for Year 2? h.What is the company's book value per share at the end of Year 2?

Natcher Corporation's accounts receivable at the end of Year 2 was $126,000 and its accounts receivable at the end of Year 1 was $130,000.The company's inventory at the end of Year 2 was $127,000 and its inventory at the end of Year 1 was $120,000.Sales,all on account,amounted to $1,380,000 in Year 2.Cost of goods sold amounted to $800,000 in Year 2.The company's operating cycle for Year 2 is closest to:

Irawaddy Company,a retailer,had cost of goods sold of $230,000 last year.The beginning inventory balance was $24,000 and the ending inventory balance was $22,000.The company's average sale period was closest to:

Harris Corporation,a retailer,had cost of goods sold of $290,000 last year.The beginning inventory balance was $26,000 and the ending inventory balance was $24,000.The corporation's inventory turnover was closest to:

Gehlhausen Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $5,600.The market price of common stock at the end of Year 2 was $5.60 per share. Required: a.What is the company's net profit margin percentage for Year 2? b.What is the company's gross margin percentage for Year 2? c.What is the company's return on total assets for Year 2? d.What is the company's return on equity for Year 2?

When a company sells used equipment for a loss,the net profit margin percentage is unaffected.

Freiman Corporation's most recent balance sheet and income statement appear below: Income Statement For the Year Ended December 31, Year 2 (in thousands of dollars) $\begin{array}{lr}\text { Sales (all on account) }&\$ 1,310 \\\text {Cost of goods sold. }&780 \\\text {Gross margin. }&530 \\\text {Selling and administrative expense }&359 \\\text {Net operating income }&171 \\\text {Interest expense }& 35 \\\text {Net income before taxes }&136 \\\text { income taxes (30\%) }& 41 \\\text {Net income }& 95\end{array}$ -The inventory turnover for Year 2 is closest to:

Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. -The current ratio at the end of Year 2 is closest to:

Louie Corporation has provided the following data: $\begin{array}{lrr}& \text { year 2}& \text {Year 1 }\\\text { Accounts receivable ........ } & \$ 269,000 & \$ 290,000 \\\text { Inventory .................... } & \$ 190,000 & \$ 160,000 \\\text { Sales, on account.......... } & \$ 1,340,000 & \\\text { Cost of goods sold ......... } & \$ 860,000 &\\\end{array}$ The company's operating cycle for Year 2 is closest to:

Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. -The working capital at the end of Year 2 is:

The following information relates to Conejo Corporation for last year: What is Conejo's price-earnings ratio for last year?

Which of the following actions would improve a current ratio of 0.8?

All other things the same,if the company purchases equipment on credit,this transaction would have no impact on the company's book value per share.

Financial statements for Narstad Corporation appear below: -Narstad Corporation's times interest earned ratio for Year 2 was closest to: