Exam 12: Financial Statement Analysis

The objective of MD&A is to allow the user to see the company through the eyes of management.

Which of the following is not an example of cross-sectional analysis?

The descriptive sections of the annual report that provides insight into what the company does and the types of risks it faces is referred to as

Which of the following descriptions best describes cross-sectional analysis?

Which of the following companies would be least likely to calculate accounts receivable turnover ratios?

Why is it important for an analyst to understand a company's corporate strategy? Define and describe two common strategies. Provide an example of each.

The statement of financial position for Hyde Corporation at the end of the current year includes the following: Income before income tax was $1,850,000, and income tax expense for the current year was $550,000. Cash dividends paid on common shares was $200,000, and cash dividends paid on preferred shares was $100,000. The common shares were selling for $85 per share at year end. Instructions Calculate the following ratios: a) Earnings per share b) Price/earnings c) Dividend yield

The diversity of operations can make it difficult to compare companies and also affects the trend analysis for the same company.

The analysis of financial statements to assist in predicting future results is an example of

Identify the different users of the financial statements and how they use the statements for financial analysis purposes.

Which of the following depicts earnings per share?

Historical results cannot be used as a foundation for predicting future outcomes.

Activity ratios help an analyst assess the company's management of its working capital.

Bellamy Corporation has only common shares issued. The company's average gross profit margin is 40%. The information shown below was taken from Bellamy's latest financial statements: Instructions Calculate the following ratios: a) Accounts Receivables turnover and average collection period b) Inventory turnover and days to sell inventory c) Return on equity

Analyzing financial data on the same company over time is called cross-sectional analysis.

Times series analysis compares the data from one company with the data from another company.

An analytical tool for comparing two companies of different sizes is

In 2020, Hazy Company had total sales of $3,547,500, it is estimated that 80% of company sales are made on credit and the average balance in the accounts receivable for the same period was $345,000. The company's credit terms require that all receivables be paid within 30 days. Instructions a) Calculate Hazy's average days to collect accounts receivable. b) Based on your answer to the above, comment on Hazy's credit policies.

Financial statement users value the auditors' opinion as the auditor is an independent third party.

Common-size income statement analysis uses net revenues as a base for all percentages.