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Exam 15: Financial Statement Analysis

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Question 61

True/False

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In a company's annual report, the section called management discussion and analysis provides critical information in interpreting the financial statements and assessing the future of the company.

A) True
B) False

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verified

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Question 62

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If two companies have the same current ratio, their ability to pay short-term debt is the same.

A) True
B) False

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Question 63

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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 dividend yield for Diane Company?

The percentage analysis of increases and decreases in individual items in comparative financial statements is called

Match each ratio that follows to its use items a-h) . Items may be used more than once. -price-earnings P/E) ratio

The current ratio is

The following items are reported on Denver Company's balance sheet: $\begin{array} { | l | l | } \hline \text { Cash } & \$ 190,000 \\\hline \text { Marketable securities } & 160,000 \\\hline \text { Accounts receivable net) } & 240,000 \\\hline \text { Inventory } & 350,000 \\\hline \text { Accounts payable } & 600,000 \\\hline\end{array}$ Determine a) the current ratio and b) the quick ratio. Round to one decimal place.

The numerator in calculating the accounts receivable turnover is

The following items are reported on a company's balance sheet: Cash $230,000 Marketable securities 50,000 Accounts receivable 200,000 Inventory 240,000 Accounts payable 300,000 Determine the a) current ratio, and b) quick ratio. Round your answer to one decimal place.

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

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

Zeus Company reports the following for the current year: $\begin{array} { | l | l | } \hline \text { Income from continuing operations before income tax } & \$ 500,000 \\\hline \text { Extraordinary property loss from hurricane } & \$ 60,000 ^ { * } \\\hline \text { Loss from discontinued operations } & \$ 90,000 ^ { * } \\\hline \text { Weighted average number of common shares outstanding } & 40,000 \\\hline \text { Applicable tax rate } & 40 \% \\\hline\end{array}$ *Net of any tax effect a) Prepare a partial income statement for Zeus Company beginning with income from continuing operations before income tax. b) Calculate the earnings per common share for Zeus, including per-share amount for unusual items.

Match each definition that follows with the term a-h) it defines. -an event or transaction that is both unusual and infrequent

A balance sheet shows cash, $75,000; marketable securities, $115,000; receivables, $150,000; and inventories, $222,500. Current liabilities are $225,000. The current ratio is 2.5.

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

The denominator of the rate of return on total assets ratio is the average total assets.

The purpose of an audit is to

All of the following are typically included in the management's discussion and analysis in annual reports except

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

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