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Exam 15: Financial Statement Analysis

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Question 71

Multiple Choice

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Which of the following items should be classified as an extraordinary item on a corporate income statement?

A) gain on the retirement of a bond payable
B) gain from land condemned for public use
C) loss due to an discontinued operation
D) selling treasury stock for more than the company paid for it

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

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Question 72

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Based on the following data for the current year, what is the number of days' sales in inventory? $\begin{array}{ll}\$ 1,204,500 & \text { Net sales on account during year } \\657,000 & \text { Cost of merchandise sold churing year } \\75,000 & \text { Accounts receivable, begining of year } \\85,000 & \text { Accounts receivable, end of year } \\81,600 & \text { Inventory, beginning of year } \\98,600 & \text { Inventory, end of year }\end{array}$

A) 50.1
B) 45.3
C) 24.7
D) 29.9

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

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Question 73

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In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

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

Assume the following sales data for a company: $\begin{array}{ll}\$ 1,017,000 & 2012 \\565,000 & 2011\end{array}$ What is the percentage increase in sales from 2011 to 2012?

A financial statement showing each item on the statement as a percentage of one key item on the statement is called common-sized financial statements.

Based on the following data for the current year, what is the number of days' sales in accounts receivable? $\begin{array}{ll}\$ 584,000 & \text { Net sales on account during year } \\300,000 & \text { Cost of merchanclise sold churingyear } \\45,000 & \text { Accounts receivable, beginning of year } \\35,000 & \text { Accounts receivable, end of year } \\90,000 & \text { Inventory, begining of year } \\110,000 & \text { Inventory, end of year }\end{array}$

In computing the ratio of net sales to assets, long-term investments are excluded from average total assets.

Which of the following should be reported net of the related income tax effect on the income statement?

In horizontal analysis, each item is expressed as a percentage of the

A company with working capital of $500,000 and a current ratio of 2.5 pays a $85,000 short-term liability. The amount of working capital immediately after payment is

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 was taken from the financial statement of Fox Resources for December 31 of the current fiscal year: The net income was $600,000 and the declared dividends on the common stock were $125,000 for the current year. The market price of the common stock is $20 per share. Required: Calculate for the common stock: (1) earnings per share (2) the price-earnings ratio (3) the dividends per share and the dividend yield. Round to one decimal place except earnings per share, which should be rounded to two decimal places.

The comparative balance sheet of Ramos Company appears below: (a) RAMOS COMPANY Comparative Balance Sheet December 31, 2012 and 2011 Instructions

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

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.

Unusual items affecting the current period's income statement consist of changes in accounting principles and discontinued operations.

A 15% change in sales will result in a 15% change in net income.

Which of the following is required by the Sarbanes-Oxley Act of 2002?

A company reports the following: Determine the (a) rate earned on stockholders' equity, and (b) rate earned on common stockholders' equity. Round your answer to one decimal place.