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Exam 13: Analyzing and Interpreting Financial Statements

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Question 111

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Use the financial data shown below to calculate the following ratios for the current year: (a) Current ratio. (b) Acid-test ratio. (c) Accounts receivable turnover. (d) Days' sales uncollected. (e) Inventory turnover. (f) Days' sales in inventory.

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(a) Current ratio:
($19,500 + $65,000 + ...

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Question 112

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Dividing ending Inventory by Cost of Goods Sold and multiplying the result by 365 is the:

A) Inventory turnover ratio.
B) Profit margin.
C) Days' sales in inventory.
D) Current ratio.
E) Total asset turnover.

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Question 113

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Common-size statements:

Clairmont Industries reported Net Income of $283,000 and average Total Assets of $637,000. The return on total assets is:

A component of operating efficiency and profitability, calculated by expressing Net Income as a percent of Net Sales, is the:

General standards of comparisons, developed from experience, include the 2:1 level for the current ratio and 1:1 level for the acid-test ratio.

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Three of the most common tools of financial analysis are:

Internal users of financial information:

The dollar change for a comparative financial statement item is calculated by:

Use the following information from the current year financial statements of a company to calculate the ratios below: (a) Current ratio. (b) Accounts receivable turnover. (Assume the prior year's accounts receivable balance was $100,000.) (c) Days' sales uncollected. (d) Inventory turnover. (Assume the prior year's inventory was $50,200.) (e) Times interest earned ratio. (f) Return on common stockholders' equity. (Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.) (g) Earnings per share (assuming the corporation has a simple capital structure, with only common stock outstanding). (h) Price earnings ratio. (Assume the company's stock is selling for $26 per share.) (i) Divided yield ratio. (Assume that the company paid $1.25 per share in cash dividends.)

Refer to the following selected financial information from Dodge Company. Compute the company's acid-test ratio.

Trend percentage is calculated by dividing _________________________ by ___________________________ and multiplying the result by 100.

Financial statement analysis may be used for personal financial investment decisions.

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick) ratio is:

Liquidity and efficiency are the ability to meet short-term obligations and to efficiently generate revenue.

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

The gross margin ratio, return on total assets, and basic earnings per share are all _____________ ratios.

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet. Its common-size percent for cash equals:

The return on total assets can be calculated as profit margin times total asset turnover.