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Exam 17: Analysis of Financial Statements

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Question 41

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The return on total assets ratio is a profitability measure.

A) True
B) False

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Question 42

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Internal users of financial information:

A) Are not directly involved in operating a company.
B) Are those individuals involved in managing and operating the company.
C) Include shareholders and lenders.
D) Include directors and customers.
E) Include suppliers, regulators, and the press.

F) A) and E)
G) D) and E)

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Question 43

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The current ratio is calculated as current liabilities divided by current assets.

A company's calendar-year financial data are shown below.The company had total assets of $339,000 and total equity of $144,400 for the prior year.No additional shares of common stock were issued during the year.The December 31 market price per share is $49.50.Cash dividends of $19,500 were paid during the year.Calculate the following ratios for the company: (a)profit margin ratio (b)gross margin ratio (c)return on total assets (d)return on common stockholders' equity (e)book value per common share (f)basic earnings per share (g)price earnings ratio (h)dividend yield.

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount,and in which the base amount is expressed as 100%,are called:

The higher the accounts receivable turnover,the less quickly accounts receivable are collected.

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.

An advantage of common-size statements is that they reflect the dollar magnitude (size)of the different companies under analysis.

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in dollar amounts and percents,are referred to as:

Financial statement analysis:

All of the following statements regarding a business segment are true except:

Selected balances from a company's financial statements are shown below.Calculate the following ratios for 2014: (a)accounts receivable turnover (b)inventory turnover (c)days' sales uncollected (d)days' sales in inventory (d)profit margin. (e)return on total assets.

The ability to meet short-term obligations and to efficiently generate revenues is called:

A company had a market price of $37.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

A company's sales in Year 1 were $250,000 and in Year 2 were $287,500.Using Year 1 as the base year,the sales trend percent for Year 2 is:

A rough guideline states that for a company with no discounts offered,days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

Financial statement analysis may be used for personal investment decisions.

A company's sales in Year 1 were $280,000,and its sales in Year 2 were $341,600.Using Year 1 as the base year,what is the sales trend percent for Year 2?

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Net sales divided by average total assets is the: