Exam 10: Using Financial Statement Analysis to Evaluate Firm Performance

Use the information provided to analyze the profitability of T-Shirt City using the following ratios: return on assets,return on equity,gross profit ratio,and earnings per share.T-Shirt City has no preferred stock.

What are the major categories of ratios used to analyze financial statements,and what do they measure?

In vertical analysis,all items on this year's income statement would be divided by ________.

The following information is from Megabux, Inc.'s annual report for the years ended December 31: -Refer to the Megabux annual report above.Calculate the gross profit ratio for 2011.

The following information is provided from Ace Electronics' annual report for the years ended December 31: -Refer to the Ace Electronics annual report above.Using horizontal analysis with 2010 as the base year, $\bold{2011}$ Cost of goods sold would be represented as ________.

One way to diversify is to ________.

The following selected information is from Acme's annual report for the years ended December 31: -Refer to the Acme annual report above.Calculate the asset turnover ratio for 2011.

The following information is provided from EZ Electronics' annual report for the years ended December 31: -Refer to the EZ Electronics annual report above.Using vertical analysis,2010 sales would be represented as ________.

Ahram's Imports had an entire shipping container of oriental rugs seized by the government of Afghanistan in 2011.The insurance company refused to pay the estimated loss of $500,000,since it was caused by an "act of war." The loss will reduce Ahram's income taxes by $70,000. Required: Show how these amounts would be reported on Ahram's income statement for the year ended December 31,2011.

Abala Corporation purchased one hundred $1,000 bonds.The corporation intends to hold the bonds until they mature in two years.This investment is characterized as ________ securities.

The following information is provided from Ace Electronics' annual report for the years ended December 31: -Refer to the Ace Electronics annual report above.Using vertical analysis, $\bold{2012}$ Gross profit would be represented as ________.

On June 1,Team Shirts sold its surfboard operations and incurred a loss on the sale.This year's operating income or loss from surfboard operations before June 1 would be reported on the income statement as part of ________.

In horizontal analysis,each item in a financial statement is expressed as a percentage of a selected line on the statement.

The following information is from Megabux, Inc.'s annual report for the years ended December 31: -Refer to the Megabux annual report above.Calculate the profit margin ratio for 2012.

The accounts receivable turnover ratio is a measure of a company's liquidity.

The following information is provided from Ace Electronics' annual report for the years ended December 31: -Refer to the Ace Electronics annual report above.Using vertical analysis, $\bold{2012}$ Cost of goods sold would be represented as ________.

________ will help give an investor some protection against losses.

Abala Corporation purchased $50,000 worth of ABC Company stock.The corporation believes that the stock price will double within a few months and plans to sell the stock as soon as its target price is reached.This investment is characterized as ________ securities.

Earnings,or net income,are important because they are used to evaluate the performance of a firm and to predict its future performance.

Use the Information below for Third World Company to complete the horizontal analysis for sales and net profit for 2011 and 2012.Use 2010 as the base year.