Exam 17: Analysis of Financial Statements

The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

Match each of the following terms with the appropriate formulas. - $\frac{\text {Total liabilities }}{\text {Total assets }}$

Graphical analysis of the balance sheet can be useful in assessing sources of financing.

Refer to the following selected financial information from Frankle Corp. Compute the company's current ratio. Current Assets 306,450 Plant assets 388,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000

Refer to the following selected financial information from McCormik, LLC. Compute the company's days' sales in inventory for Year 2. (Use 365 days a year.) Year 2 Year 1 Cash \ 37,500 36,850 Short-term investments 90,000 90,000 Accounts receivable, net 85,500 86,250 Merchandise inventory 121,000 117,000 Prepaid expenses 12,100 13,500 Plant assets 388,000 392,000 Accounts payable 113,400 111.750 Net sales 711,000 706,000 Cost of goods sold 390,000 385,500

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for cost of goods sold using 2016 as the base. 2016 Net sales \ 276,200 \ 231,400 Cost of goods sold 151,900 129,590 Operating expenses 55,240 53,240 Net earnings 27,820 19,820

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Intra-company analysis compares a company's current performance to its own prior performance.

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Match each of the following terms with the appropriate formulas. - $\frac{\text {Net income - Preferred dividends }}{\text { Average common stockholders' equity}}$

The return on total assets can be calculated as profit margin times total asset turnover.

Guidelines (rules-of-thumb)are general standards of comparison developed from:

How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:

Current assets divided by current liabilities is the:

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The current assets consisted of $62,000 Cash; $43,000 Accounts Receivable; and $88,000 of Inventory. The acid-test (quick)ratio is:

Financial reporting includes not only general purpose financial statements, but also information from SEC filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.

Trend analysis of financial statement items can include comparisons of relations between items on different financial statements.

Quick assets divided by current liabilities is the:

The higher the accounts receivable turnover, the less quickly accounts receivable are collected.