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Exam 14: Financial Statement Analysis

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Question 61

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A comparative financial statement:

A) Places the balance sheet,the income statement,and the statement of cash flows side-by-side in order to compare the results.
B) Places two or more years of a financial statement side-by-side in order to compare results.
C) Places the financial statements of two or more companies side-by-side in order to compare results.
D) Places the dollar amounts next to the percentage amounts of a given year for the income statement.

E) B) and C)
F) A) and B)

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Question 62

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A company's liquidity refers to its ability to remain profitable.

A) True
B) False

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Question 63

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Generally speaking,which appears to be a desirable current ratio?

Amalgamated Corporation's net income was $2,400,000 in 2014 and $800,000 in 2015.What percentage increase in net income must Amalgamated achieve in 2016 to offset the decline in profits in 2015?

The changes in financial statement items from a base year to following years are called:

ROE - return on equity - is measured by dividing net income by average number of shares outstanding.

The return on assets ratio usually is computed as:

Profitability measures Shown below is a recent income statement for B-D Electric. Assume that comparative balance sheets for B-D Electric indicate average total assets for the year of $2,500,000,and average total equity of $2,050,000.Compute the following:

An organization that provides ratings of corporate governance services is:

The more pessimistic investors' expectations regarding a company's future performance,the lower the price-earnings ratio is likely to be.

Financial ratios Shown below are some key figures from the balance sheets of Minuteman Gas Company for two successive years: Dividends of $96,000 were declared and paid in 2015.Compute the following: Current ratio at end of 2014. Current ratio at end of 2015. Working capital at end of 2014. Working capital at end of 2015. Debt ratio at end of 2014. Debt ratio at end of 2015. Earnings per share for 2015.

The yield rate on stock is measured by dividing dividends per share by market price per share.

The return on equity ratio may be either higher or lower than the return on assets ratio.

Effects of transactions upon analytical measurements Determine the immediate effect of each of the transactions described below on the ratio listed beside each transaction.In the blank space to the left of each statement,you are to indicate the effect by writing the appropriate code letter.The code letters are as follows: I = increase the ratio,D = decrease the ratio,and NE = no effect on this ratio.