Exam 17: Financial Statement Analysis

The numerator of the return on common stockholders' equity is

If a firm has a current ratio of 2, the subsequent collection of a 60-day note receivable on account will cause the ratio to decrease.

Gallant Company reported net income of $2,500,000. The income statement included a $200,000 loss on discontinued operations, 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.

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

Use the information below for Harding Company to answer the questions that follow. ​ $\text { Harding Company }$ Accounts payable 40,000 Accounts receivable 65,000 Accrued liabilities 7,000 Cash 30,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 110,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 30,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000 -Based on the data for Harding Company, what is the quick ratio, rounded to one decimal point?

Use this information for Kellman Company to answer the questions that follow. ​ The balance sheets at the end of each of the first two years of operations indicate the following: ​ $\text { Kellman Company }$ Year 2 Year 1 Total current assets \ 600,000 \ 560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 125,000 65,000 Total long-term liabilities 350,000 250,000 Preferred 9\% stock, \ 100 par 100,000 100,000 Common stock, \ 10 par 600,000 600,000 Paid-in capital in excess of par-Common stock 75,000 75,000 Retained earnings 310,000 210,000 -Using the balance sheets for Kellman Company, if net income is $150,000 and interest expense is $20,000 for Year 2, what is the return on stockholders' equity for Year 2?

Match each definition that follows with the term (a-h) it defines. -Use debt to increase the return on an investment

The numerator of the return on total assets is

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

The denominator of the return on total assets ratio is the average total assets.

Cash and accounts receivable for Ashfall Co. are provided below.​ Current Year Prior Year Cash \ 62,400 \ 58,000 Accounts receivable (net) 42,000 50,000 Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis? Round percentages to one decimal place.

If two companies have the same current ratio, their ability to pay short-term debt is the same.

The numerator in calculating the accounts receivable turnover is

The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

Prepare an income statement using the following data for New Orleans Adventures for the year ended December 31:

An increase in the accounts receivable turnover may be due to a change in how credit is granted and/or in collection practices.

Match each ratio that follows to its use (items a-h). Items may be used more than once. -Dividends per share

Match each definition that follows with the term (a-h) it defines. -An analysis of a company's ability to pay its current liabilities

The following income statement information is for Sadie Company:Sales$175,000Cost of goods sold115,000Gross profit$ 60,000​Using vertical analysis of the income statement for Sadie Company, determine the gross profit margin.

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.