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Exam 13: Analyzing and Interpreting Financial Statements

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Question 31

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Net income divided by net sales is the:

A) Return on total assets.
B) Profit margin.
C) Current ratio.
D) Total asset turnover.
E) Days' sales in inventory.

F) B) and D)
G) D) and E)

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Question 32

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Ratios must refer to economically important relationships, such as a sale price compared to its cost.

A) True
B) False

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Question 33

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Liquidity refers to the availability of resources to meet short-term cash requirements.

Current assets minus current liabilities is:

A ratio expresses a mathematical relation between two quantities and can be expressed as a percent, rate, or proportion.

Calculate the percent increases for each of the following balance sheet items.

Carducci Corporation reported Net Sales of $3.6 million and beginning Total Assets of $0.9 million and ending Total Assets of 1.3 million. The average total asset amount is:

General-purpose financial statements include the (1) income statement, (2) balance sheet, (3) statement of stockholders' equity (or statement of retained earnings), (4) statement of cash flows, and (5) notes to these statements.

The comparison of a company's financial condition and performance across time is known as:

Horizontal analysis:

Capital structure refers to a company's long-run financial viability and its ability to cover long-term obligations.

Refer to the following selected financial information from Keller Company. Compute the company's debt to equity for Year 2.

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

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

Washburn Company reported sales of $1,722,000 for Year 1 and $1,831,000 for Year 2. Using Year 1 as the base year, what was the percentage change for sales from Year 1 to Year 2?

Earnings per share are calculated only on income from continuing operations.

Comparative calendar year financial data for a company are shown below. Calculate the following ratios for 2017: (a) return on total assets (b) return on common stockholders' equity.

Financial analysis only refers to the communication of relevant financial information to decision makers.

____________ is a method of analysis used to evaluate individual financial statement items or groups of items in terms of a specific base amount.

A corporation reported cash of $14,000 and total assets of $178,300. Its common-size percent for cash equals 7.85%. ($14,000/$178,300) * 100 = 7.85%