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Exam 14: Financial Statement Analysis

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Question 61

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When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item before income from continuing operations on the income statement.

A) True
B) False

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Question 62

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In a common-sized income statement, each item is expressed as a percentage of net income.

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B) False

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Question 63

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In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.

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

Match each definition that follows with the term a-h it defines. -requires a restatement of prior-period financial statements

The percent of fixed assets to total assets is an example of

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

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

What is the rate earned on total assets for Diane Company?

Gallant Company reported net income of $2,500,000.The income statement included a $500,000 gain from condemnation of land and a $200,000 loss on discontinued operations, both after applicable income tax.There were 100,000 shares of $10 par common stock and 40,000 shares of 4% preferred stock of $100 par outstanding throughout the current year. Prepare the earnings per share section of Gallant Company's income statement.

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

The dividend yield rate is equal to the dividends per share divided by the par value per share of common stock.

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.

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

For Garrison Corporation, the working capital at the end of the current year is $10,000 more than the working capital at the end of the preceding year, reported as follows: Has the current position of Garrison Corporation improved? Explain.

The following items are reported on Denver Company's balance sheet: Determine a the current ratio and b the quick ratio.Round to one decimal place.

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

Comparable financial statements are designed to compare the financial statements of two or more corporations.

Current position analysis measures a company's ability to pay its current liabilities.

Horizontal analysis of comparative financial statements includes