Exam 5: Using Financial Statement Information

Use the information that follows taken from Tyler Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems 13 through 19. -The industry in which Tyler operates has an average current ratio of 2.1 on December 31, 2010. Comment on Tyler's solvency compared to the industry average as measured by its current ratio.

Financial flexibility is

What type of audit report do most companies receive from their auditors?

An analyst assessed a company and determined the company to have reported a "high quality of earnings." This implies that

Earnings per share

Justin Company has total assets, liabilities, and shareholders' equity of $36,000, $15,000, and $21,000, respectively, at the beginning of 2010. At the end of 2010, total assets, liabilities, and shareholders' equity were reported at $32,000, $13,000, and $19,000, respectively. What is Justin's debt to equity ratio? a. 0.70 b. 1.17 c. 0.71 d. 1.13

Briefly describe a company with a current ratio of 0.33 and return on equity of 0.02.

Smith Company has total assets, liabilities, and shareholders' equity of $20,000, $7,000, and $13,000, respectively, at the beginning of 2010. At the end of 2010, total assets, liabilities, and shareholders' equity were reported at $16,000, $5,000, and $11,000, respectively. A. How much additional debt can Smith incur and still have its debt/equity ratio remain less than or equal to 1.00? B. What information does the debt/equity ratio provide you?

Madison Company has current assets, current liabilities, and long-term liabilities of $8,000, $4,000, and $6,000, respectively. Within these amounts, inventory was $2,000, receivables were $2,000, cash was $4,000, and payables were $1,000. Calculate Madison's quick ratio. What information does this provide?

Harrison Company has common stock of $50,000 and retained earnings of $40,000 at yearend. During the year, 10,000 shares of stock were outstanding. Net income was reported as $5,000. A. Calculate earnings per share. B. How does earnings per share differ from most of the other ratios with respect to financial statements?

Managers that structure financing transactions and choose accounting methods that exclude debt on the company's balance sheet are using

Briefly explain how management may influence the quality of earnings of a company.

Liquidity is the ability

Sheena Company has current assets, current liabilities, and long-term liabilities of $19,000, $13,000, and $17,000, respectively. Within these amounts, $3,000 is accounts payable, and $3,500 is accounts receivable. If $2,000 of cash were used to pay off the accounts payable, what effect would this have on the current ratio? a. The current ratio would increase by approximately 0.09. b. The current ratio would decrease by approximately 0.09. c. The current ratio would decrease by approximately 0.03. d. There would be no change in the current ratio.

For each characteristic which appears numbered from 1 through 5 below, select the correct factor which should be considered in each assessment as listed in items a through e. ____ 1. Ability to get cash from sale of assets and issuance of debt or stock ____ 2. Avoiding reporting financial responsibilities on the balance sheet ____ 3. Measured by profitability and activity ratios and cash provided by operations ____ 4. Delaying the sale of inventory until the following year because current profits are satisfactory ____ 5. Ability to convert existing assets into cash

The following ratios were computed from the financial statement of Darren Technologies: Which of the following statements is true?

The dividend yield ratio helps assess the

Common-size financial statements are expressed as

Use the information that follows taken from Carter Company's financial statements for the years ending December 31, 2010 and 2009 to answer problems 3 through 9. -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, 2010, Carter is taking full advantage of investing borrowed capital in its operations relative to that of the average firm in its industry. Explain.

The current ratio