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Exam 18: Analyzing Financial Statements

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Question 101

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Seinfield Corporation had cash of $16,000 and total assets of $178,300.The common-size percent for cash was 7.85%.

A) True
B) False

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Question 102

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Given the following information from the current financial statements of Arbonne Corp,calculate the ratios listed below the financial statements. (A)Current ratio. (B)Accounts receivable turnover. Assume the beginning of year accounts receivable balance was $59,500. (C)Days' sales uncollected. (D)Merchandise turnover. Assume the beginning of year merchandise inventory was $50,200. (E)Times interest earned. (F)Return on common shareholders' equity. Assume the beginning of year common shares balance was $180,000 and retained earnings was $128,000. (G)Earnings per share (assume Arbonne Corp's average common shares outstanding is 50,000). (H)Price-earnings ratio. Assume the company's shares are selling for $26 per share.

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Question 103

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The ability to provide financial rewards sufficient to attract and retain financing is called:

The Marr Corp had net income of $75,000 and 25,000 common shares outstanding throughout the year.On December 31,the shares of Marr sold for $43.50.What is Marr's price-earnings ratio?

Decision makers and other users of financial statements are especially interested in evaluating a company's ability to use its assets in generating sales.

The times interest earned ratio is calculated by dividing income before interest and income taxes by interest expense.

The book value of a firm's total assets is $550,000 and it has pledged $500,000 of those assets to secure a loan of $450,000.The firm's total liabilities are $425,000.The pledged assets to secured liabilities is:

The gross margin ratio equals net sales less _______________ divided by net sales.

Explain the current ratio.Describe how it is used to evaluate a company.

CompUS has pledged $275,000 worth of its assets.The total book value of its assets is $625,000.The firm's total liabilities are $750,000.The secured liabilities are $150,000.The pledged assets to secured liabilities is:

The gross profit ratio:

Selected balances from Nowland Corporation's records are as follows: Use the information presented above to calculate the following for year 2: (A)Merchandise turnover. (B)Days' sales in inventory. (C)Profit margin. (D)Return on total assets.

Horizontal statement analysis is used to reveal changes in the relative importance of each financial statement item.

Which of the following statements is incorrect?

Internal users of financial information:

The merchandise turnover ratio is calculated by dividing average merchandise inventory by cost of goods sold.

All companies desire a low return on total assets.

Dairy King has total assets of $325 million.Its total liabilities are $110 million.Its equity is $315 million.Calculate the debt ratio.

Describe ratio analysis.

The price-earnings ratio reveals information about the stock market's expectations for a company's future growth in earnings,dividends,and opportunities.