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Exam 13: Analyzing and Interpreting 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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The measurement of key relationships between financial statement items is known as ________.

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Question 43

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The following current year information is available from a manufacturing company: $\begin{array}{lr}\text { Sales } & \$ 740,000 \\\text { Gross profit on sales } & 276,000 \\\text { Operating income } & 64,000 \\\text { Income before taxes } & 44,000 \\\text { Net income } & 33,600 \\\text { Accounts Receivable, beginning-year } & 58,000 \\\text { Accounts Receivable, end-of-year } & 72,000\end{array}$ Calculate the company's accounts receivable turnover and its days' sales uncollected.

Financial reporting includes not only general purpose financial statements,but also information from SEC filings,press releases,shareholders' meetings,forecasts,management letters,auditor's reports,and Webcasts.

The purpose of financial statement analysis for external users is to provide information to improve efficiency and effectiveness.

The standards for comparisons when interpreting measures from financial statement analysis include (1)________,(2)________,(3)________,and (4)________.

Evaluation of company performance can include comparison and/or assessment of all but which of the following:

Zhang Company reported Cost of goods sold of $835,000,beginning Inventory of $37,200 and ending Inventory of $46,300.The average Inventory amount is:

When no value is in the base period,no percent change is computable.

The debt ratio,the equity ratio,pledged assets to secured liabilities,and times interest earned are all ________ ratios.

Financial statement analysis involves all of the following except:

Ratios may be expressed as (1)________,(2)________,or (3)________.

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Describe the purpose of vertical financial statement analysis and how it is applied.

General-purpose financial statements include the (1)________,(2)________,(3)________,(4)________ and (5)________.

Comparative financial statements are reports that show financial amounts in side by side columns on a single statement for analysis purposes.

________ ratios include the price-earnings ratio and dividend yield.

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Selected current year end financial information for a company is presented below.Calculate the following company ratios: (a)Profit margin. (b)Total asset turnover. (c)Return on total assets. (d)Return on common stockholders' equity (assume the company has no preferred stock). Net income……………………………….. $ 325,000 Net sales………………………………….. 4,700,000 Total liabilities,beginning-year………….. 550,000 Total liabilities,end-of-year……………… 530,000 Total stockholders' equity,beginning-year. 760,000 Total stockholders' equity,end-of-year….. 745,000

Use the following selected information from Wheeler,LLC to determine the 2018 and 2017 trend percentages for cost of goods sold using 2017 as the base. $\begin{array}{lrrl}&2018&&2017\\Net ~sales&\$ 276,200& & \$ 231,400 \\Cost ~of ~goods ~sold&151,90 0 & & 129,590 \\Operatirg ~expenses&55,240 & & 53,240 \\Net ~earmirgs&27,820 & & 19,820\end{array}$