Exam 5: Using Financial Statement Information

Use the information that follows taken from Tyler Company's financial statements for the years ending December 31, 2017 and 2016. Balance Sheet Information 2017 2016 Assets Cash \ 90 \5 0 Accounts receivable 60 80 Inventory 40 80 Land, building, and equipment Total Assets Liabilities and Shareholders' Equity Accounts payable \ 5 \ 85 Common stock 260 260 Retained earnings Total Liabilities \& Shareholders' Equity \ \ Income Statement Information Sale revenue \8 50 Cost of goods sold Gross profit \2 50 Operating expenses Net income If the industry in which Tyler is a member has an average return on assets of 11%, determine if in 2017, Tyler is more or less profitable than the average firm in its industry. Assume Tyler has no interest expense.

The item that causes the greatest and most immediate effect on a company's stock price will generally be

Return on equity helps assess a company's

Many ratios require an average be used for the balance sheet numbers because the

Grey Company has a current ratio of 0.35 and return on equity of 0.04. Which of the following statements is the best regarding Grey's profitability and solvency?

Which of the following ratios would be of primary importance to a creditor in deciding to extend long-term credit?

Briefly describe a company with a quick ratio of 3.70 and return on equity of 0.06.

Monroe Company has current assets, current liabilities, and long-term liabilities of $12,000, $3,000, and $9,000, respectively. Within these amounts, $1,200 is accounts payable, and $1,500 is accounts receivable. What effect will the payment of the accounts payable have on the current ratio? Should Monroe pay the accounts payable on the last day of the year? Explain.

The current ratio helps assess a company's

Use the information that follows taken from Carter Company's financial statements for the years ending December 31, 2017 and 2016. Balance Sheet Information 2017 2016 Assets Cash \ 70 \ 80 Accounts receivable 40 40 Inventory 40 60 Land, building, and equipment Total Assets \ \ Liabilities and Shareholders' Equity Accounts payable \ 95 \ 245 Common stock 210 210 Retained earnings 135 35 Total Liabilities \& Shareholders' Equity $\begin{array}{lr}\text { Income Statement Information }\\\text { Sales (all sales are on credit) } & \$ 900 \\\text { Cost of goods sold } & \underline{300} \\\text { Gross profit } & {\$600}\\\text { Operating expenses } & \underline{ 500} \\\text { Net income } & \underline{ \$(100)} \end{array}$ The industry in which Carter is a member has an average debt/equity ratio of 0.83. Determine if, as measured by the debt/equity ratio on December 31, 2017, Carter is taking full advantage of investing borrowed capital in its operations relative to that of the average firm in its industry. Explain.

In what ways might an investor use accounting information provided by a foreign company differently from information provided by a domestic corporation?

Taylor Company has the following financial data on January 1, 2017 and January 1, 2016. 1/1/17 1/1/16 Cash \ 15,000 \ 27,000 Accounts receivable 23,000 11,000 Marketable securities 3,000 10,000 Inventary 16,000 35,000 Net plant and equipment 40,000 32,000 Current liabilities \ 18,000 \ 27,000 Lang-term debt 49,000 30,000 Sharehalders' equity 30,000 58,000 A. In terms of the quick and current ratio, has the short-term solvency position of Taylor improved, remained the same, or declined? B. If you were a potential short-term creditor to Taylor, would you be more willing to extend credit on either January 1, 2016 or 2017? Explain.

Accounting numbers are useful in that they

Devin Inc. has an inventory turnover ratio of 35. Devin's average number of day's inventory is:

Information concerning industry averages will likely be found in

A standard audit report

The two fundamental ways in which financial accounting numbers are useful are

Which of the following may be a limitation of financial statements?