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Exam 14: Financial Statement Analysis

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Question 91

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The excess of current assets over current liabilities is referred to as working capital.

A) True
B) False

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Question 92

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

A) above income from continuing operations
B) without related tax effect
C) below income from continuing operations
D) as an operating expense

E) B) and D)
F) A) and D)

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Question 93

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Income statement information for Lucy Company is provided below: ​ Prepare a vertical analysis of the income statement for Lucy Company.

In computing the return on total assets,interest expense is subtracted from net income before dividing by average total assets.

The ratio of the sum of cash,receivables,and marketable securities to current liabilities is referred to as the current ratio.

Using the balance sheets for Kellman Company,if net income is $150,000 and interest expense is $20,000 for Year 2,what is the return on total assets for the year?

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

The following data are taken from the financial statements: ​

Using the balance sheets for Kellman Company,if net income is $150,000 and interest expense is $20,000 for Year 2,what is the return on stockholders' equity for Year 2?

The following selected data were taken from the financial statements of the Winter Group for the three most recent years of operations: ​ The Year 3 net income was $242,000 and the Year 2 net income was $308,000.No dividends on common stock were declared during the 3 years. ​ (a)Determine the return on total assets,the return on stockholders' equity,and the return on common stockholders' equity for Years 2 and 3.Round to one decimal place. (b)What conclusion can be drawn from these data as to the company's profitability?

The following data are taken from the financial statements: ​

Corporate annual reports typically do not contain

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

A change from one acceptable accounting method to another is reported

Analyzing a company's performance should take into account conditions peculiar to the industry and the general economic conditions.

What information is generally included in the Management Discussion and Analysis (MD&A)section of a corporate annual report?

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

Based on the following data for the current year,what is the number of days' sales in inventory?

Which of the following is not an unusual item?

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to