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Exam 15: Financial Statement Analysis

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Question 41

Multiple Choice

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The ability of a business to pay its debts as they come due and to earn a reasonable net income is

A) solvency and leverage
B) solvency and profitability
C) solvency and liquidity
D) solvency and equity

E) A) and D)
F) A) and C)

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Question 42

Multiple Choice

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-Based on the above data, what is the amount of quick assets?

A) $205,000
B) $203,000
C) $131,000
D) $66,000

E) None of the above
F) A) and C)

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Question 43

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The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

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

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

Which of the following would appear as an extraordinary item on the income statement?

An extraordinary item must be either unusual in nature or infrequent in occurrence.

Which of the following is the most useful in analyzing companies of different sizes?

Comparable financial statements are designed to compare the financial statements of two or more corporations.

On a common-sized balance sheet, 100% is

A balance sheet that displays only component percentages is a

In horizontal analysis, the current year is the base year.

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

A loss due to a discontinued operation should be reported on the income statement

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 answer to one decimal place.

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

In a common-sized income statement, each item is expressed as a percentage of net income.

The relationship of $325,000 to $125,000, expressed as a ratio, is

Revenue and expense data for Young Technologies are as follows: a) Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round to the nearest whole percent. b) Comment on the significant changes disclosed by the comparative income statement.