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Exam 15: Financial Statement Analysis

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Question 51

Multiple Choice

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

A) vertical analysis
B) solvency analysis
C) profitability analysis
D) horizontal analysis

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

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Question 52

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A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

A) True
B) False

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Question 53

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Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales,a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in inventory management.

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $115,000 and interest expense is $30,000 for 2012,what are the earnings per share on common stock for 2012, (round to two decimal places) ?

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability.As a result of this transaction,the current ratio and working capital will

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $115,000 and interest expense is $30,000 for 2012 what is the rate earned on total assets for 2012 (round percent to one decimal point) ?

The following information is available for Taylor Company: Which of the following statements is correct?

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

When computing the rate earned on total common stockholders' equity,preferred stock dividends are subtracted from net income.

A clean audit opinion is the same as a qualified audit opinion.

A company reports the following: Determine the (a)accounts receivable turnover,and (b)number of days' sales in receivables.Round your answer to one decimal place.

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

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

Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

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

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

The comparative balance sheet of Ramos Company appears below: (a)RAMOS COMPANY Comparative Balance Sheet December 31,2012 and 2011 Instructions Round percentage to one decimal place.

The rate earned on total assets measures the profitability of total assets,without considering how the assets are financed.