Exam 13: How Do Managers Use Financial and Nonfinancial Performance Measures

A trend percentage is calculated as the current year divided by the base year.

Exhibit 13-1 Xavier Company reported the following income statement and balance sheet amounts on December 31,2017. Net sales revenue (all credit) \ 1,700,000 Cost of goods sold 1,040,000 Gross margin 660,000 Selling and general expenses 420,000 Interest expense \ 0,000 Net income \ 180,000 Current assets \ 100,000 \ 90,000 Long-term assets 830,000 800,000 Total assets \ 930,000 \ 890,00 Current liabilities \ 56,00 Long-term liabilities 204,000 390,00 Common stockholders' equity 654,000 444,00 Total liabilities and stockholders' equity \ 930,000 \ 890,00 Inventory and prepaid expenses account for $50,000 of the 2017 current assets. Average inventory for 2017 is $36,000. Average net accounts receivable for 2017 is $62,000. Average one-day sales are $5,900. There are 12,000 shares of common stock outstanding at the end of 2017. The market price per share of common stock is $27 at the end of 2017. The EPS for 2017 is equal to $1.50 per share. -Refer to Exhibit 13-1.What is the debt to assets ratio for 2016 (rounded to two decimal places)?

Exhibit 13-1 Xavier Company reported the following income statement and balance sheet amounts on December 31,2017. Net sales revenue (all credit) \ 1,700,000 Cost of goods sold 1,040,000 Gross margin 660,000 Selling and general expenses 420,000 Interest expense \ 0,000 Net income \ 180,000 Current assets \ 100,000 \ 90,000 Long-term assets 830,000 800,000 Total assets \ 930,000 \ 890,00 Current liabilities \ 56,00 Long-term liabilities 204,000 390,00 Common stockholders' equity 654,000 444,00 Total liabilities and stockholders' equity \ 930,000 \ 890,00 Inventory and prepaid expenses account for $50,000 of the 2017 current assets. Average inventory for 2017 is $36,000. Average net accounts receivable for 2017 is $62,000. Average one-day sales are $5,900. There are 12,000 shares of common stock outstanding at the end of 2017. The market price per share of common stock is $27 at the end of 2017. The EPS for 2017 is equal to $1.50 per share. -Refer to Exhibit 13-1.What is the current ratio for 2017 (rounded to two decimal places)?

If a company's return on assets is higher than its return on shareholders' equity,then it has positive financial leverage.

Companies with higher inventory turnover ratios tend to have lower inventory costs,including lower inventory storage and insurance costs,than companies with lower inventory turnover ratios.

Pilot Company has the following information available for 2016 and 2017: 2016 2017 Property, Plant, and \ 4,500,000 \ 3,600,000 Equipment If you were performing a trend analysis on this information,you would say that property,plant,and equipment has:

The following condensed income statement is for Boston Inc. Boston Inc. Income Statement Years ended December 31, 2017 and 2016 (in thousands) 2017 2016 Net sales \ 20,000 \ 13,000 Cost of goods sold 13,000 9,000 Gross margin 7,000 4,000 Selling and administrative expenses 3,000 2,000 Operating income 4,000 2,000 Other expense, net 300 200 Income before taxes 3,700 1,800 Income tax expense 800 400 Net income \ 2.900 \ 1.400 Prepare a common-size analysis of the income statements for 2016 and 2017.(Round percent computations to one decimal place. )

Exhibit 13-1 Xavier Company reported the following income statement and balance sheet amounts on December 31,2017. Net sales revenue (all credit) \ 1,700,000 Cost of goods sold 1,040,000 Gross margin 660,000 Selling and general expenses 420,000 Interest expense \ 0,000 Net income \ 180,000 Current assets \ 100,000 \ 90,000 Long-term assets 830,000 800,000 Total assets \ 930,000 \ 890,00 Current liabilities \ 56,00 Long-term liabilities 204,000 390,00 Common stockholders' equity 654,000 444,00 Total liabilities and stockholders' equity \ 930,000 \ 890,00 Inventory and prepaid expenses account for $50,000 of the 2017 current assets. Average inventory for 2017 is $36,000. Average net accounts receivable for 2017 is $62,000. Average one-day sales are $5,900. There are 12,000 shares of common stock outstanding at the end of 2017. The market price per share of common stock is $27 at the end of 2017. The EPS for 2017 is equal to $1.50 per share. -Refer to Exhibit 13-1.What is the gross margin ratio for 2017 (rounded to the nearest tenth of a percent)?

Which of the following is the best explanation of a company's inventory turnover of 12.0 for the year 2017?

Exhibit 13-1 Xavier Company reported the following income statement and balance sheet amounts on December 31,2017. Net sales revenue (all credit) \ 1,700,000 Cost of goods sold 1,040,000 Gross margin 660,000 Selling and general expenses 420,000 Interest expense \ 0,000 Net income \ 180,000 Current assets \ 100,000 \ 90,000 Long-term assets 830,000 800,000 Total assets \ 930,000 \ 890,00 Current liabilities \ 56,00 Long-term liabilities 204,000 390,00 Common stockholders' equity 654,000 444,00 Total liabilities and stockholders' equity \ 930,000 \ 890,00 Inventory and prepaid expenses account for $50,000 of the 2017 current assets. Average inventory for 2017 is $36,000. Average net accounts receivable for 2017 is $62,000. Average one-day sales are $5,900. There are 12,000 shares of common stock outstanding at the end of 2017. The market price per share of common stock is $27 at the end of 2017. The EPS for 2017 is equal to $1.50 per share. -Refer to Exhibit 13-1.What is the debt to equity ratio for 2016 (rounded to two decimal places)?

Return on assets is a market valuation measure.

Which of the following types of measures focuses primarily on income statement information?

During 2017,Victory Inc.had beginning accounts receivable of $42,000 and ending accounts receivable of $48,000.Its net sales of $450,000 are composed of 20% cash sales and 80% credit sales.Based on this information,what is Victory's receivables turnover ratio?

The debt to assets ratio is calculated as total assets divided by total liabilities.

Assume that Crimson Company's market price per share remains at $20 over a two-year period.Over the same two-year period,Crimson sells an additional 100,000 shares of stock to investors.Net income was the same for both years.The issuance of additional shares will have the following effect for the company over the two-year period:

All of the following measures evaluate profitability except:

On a common-size balance sheet,equipment should be stated as a percentage of:

Most public companies present trend information in their annual reports.

All of the following ratios are used to evaluate short-term liquidity except:

The following condensed income statement is for Mason Inc. Mason Inc. Income Statement Years ended December 31, 2017 and 2016 (in thousands) 2017 2016 Net sales ( 80\% are credit sales) \ 60,000 \ 46,000 Cost of goods sold 26,000 20,000 Gross margin 34,000 26,000 Selling and administrative expenses 6,000 4,000 Operating income 28,000 22,000 Interest expense 1,000 1,000 Income before taxes 27,000 21,000 Income tax expense 2,000 1,000 Net income \ 25,000 \ 20,000 Compute the following ratios for 2017,and provide a brief explanation after each ratio (round percentage computations to one decimal place and earnings per share to two decimal places): (1)Gross margin ratio (2)Profit margin ratio (3)Return on assets (4)Return on common shareholders' equity (5)Earnings per share (assume weighted average shares outstanding totaled 2,900,000 shares) (6)Market capitalization (assume 3,000,000 shares were issued and outstanding at December 31,2017,and the market price was $9.00 per share) (7)Price-earnings ratio