Exam 2: Financial Statements and the Annual Report

Most financial reports contain the following list of basic elements. For each element identify the persons who prepared the element and describe the information a user would expect to find in each element.

Some analysts properly refer to a company's profit margin as its return on assets.

Forman, Inc. earned $600,000 profit during 2015. On which financial statements will you find the dollar amount of the profit earned by the company?

From the following list, select the proper section from the statement of cash flows in which it would be classified. -Paid income taxes

Match the selected items from a classified balance sheet and multiple-step income statement to the section in which they would appear on the classified balance sheet or the income statement. -Consulting revenues

How does the definition of a current liability relate to that of a current asset?

Excursion Corp. increased its dollar amount of working capital over the past several years. To further evaluate the company's short-run liquidity, which one of the following measures should be used?

How is a classified balance sheet useful to decision makers?

Service-oriented companies have different needs than product-oriented companies when analyzing financial statements. REQUIRED: Why is this true? Give an example of a financial ratio that is meaningless to a service business.

For each item listed, select the section of the balance sheet in which the item would be reported. -Retained earnings

Read the information about Cargo Corporation. Required: Prepare the current liabilities section of the balance sheet for Cargo Corp. at December 31, 2015. You may omit the heading. If the amount of current liabilities were larger, what effect would this have on the current ratio?

Match the following characteristics with the statements about each qualitative characteristic's importance. -The accounting information must be information that could affect a decision.

The 2015 income statement of Cigmar Enterprises shows operating revenues of $120,500, selling expenses of $35,200, general and administrative expenses of $29,900, interest expense of $1,500, and income tax expense of $10,520. Cigmar's stockholders' equity was $280,000 at the beginning of the year and $320,000 at the end of the year. The company has 20,000 shares of stock outstanding at December 31, 2015. REQUIRED: Compute Cigmar's profit margin. What other information would you need in order to comment on whether this ratio is favorable?

Which one of the following categories on a statement of cash flows is used to report the cash flow effects of buying and selling property, plant, and equipment?

Marvel Shoes Marvel Shoes reported the following items on its statement of cash flows for the current year: -Read the information about Marvel Shoes. What was the amount of net increase or decrease in the cash balance for Marvel Shoes for the current year?

Which of the following terms characterizes the time period between the investment of cash in merchandise and the collection of cash from the sale of that merchandise?

The quality of accounting information that allows a user to compare two or more accounting periods for a single company is known as consistency.

One significant difference between a classified and a non-classified balance sheet is the distinction between which of the following items?

is the quality of accounting information that allows a user to analyze two or more companies and look for similarities and differences.

In a -step income statement, all expenses and losses are added together, then deducted from the sum of all revenues and gains.