Exam 16: Financial Statement Analysis

An example of horizontal analysis is the increase in cost of goods sold by 25% from 2013 to 2014.

The following items were taken from the financial statements of Ritz Inc., over a 4-year period: Required: Using horizontal analysis and 2011 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

_________________ measure the ability of a company to meet its current obligations.

Which one of the following would be considered a leverage ratio?

Figure 16-5. The following information that was obtained from the 2014 and 2013 financial statements of James Company, Norris Corporation, and Zorro Company: -Refer to Figure 16-5. Compare the three companies and answer the following:

Phillips Company had $300,000 in sales on account last year. The beginning accounts receivable balance was $25,000 and the ending accounts receivable balance was $18,000. The company's accounts receivable turnover ratio was closest to

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Measures the earning ability of a company

If a company has an acid-test ratio of 1.2, what respective effects will the borrowing of cash by short-term debt and the collection of accounts receivable have on the ratio? Short-term Collection of Borrowing Receivable

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Allows evaluation of the extent to which funds are used efficiently

Figure 16-6 London Company provided the following income statements for its first 3 years of operation: -Refer to Figure 16-6. Prepare a horizontal analysis using Year 1 as the base year. Explain if the results are favorable or unfavorable.

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Earnings per share

A number of online sources contain competitive information on individual company's ratios.

The following data have been taken from your company's financial records for the current year: The price-earnings ratio is

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -The relationship between dividends and the market price of a company's stock

An aircraft company would most likely have

Small sample sizes for an industrial report rarely cause a comparability problem in using standards.

MATCHING Match the classifications of ratios with each description. a. Liquidity Ratio b. Leverage Ratio c. Profitability Ratio d. Horizontal Analysis e. Trend Analysis -Return on sales

Siri Company has $20,000 in cash, $8,000 in marketable securities, $36,000 in current receivables, $18,000 in inventories, and $68,000 in current liabilities. The company's quick ratio is closest to

Figure 16-6 London Company provided the following income statements for its first 3 years of operation: -Refer to Figure 16-6. Prepare a vertical analysis by using net sales as the base.

Presented below are selected data from the financial statements of Korn Corp. for 2014 and 2013. The price-earnings ratio for 2014 is