Exam 9: Financial Statement Analysis

The ratio computed by dividing current assets by current liabilities is called:

Current position analysis indicates a company's ability to liquidate current liabilities.

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

Which of the following measures the liquidity position of a corporation?

Based on the following data for the current year, compute the number of days' sales in accounts receivable? \ 800,000 Net sales on account during the year 300,000 Cost of merchandise sold during the yeat 45,000 Accounts receivable, be ginning of year 35,000 Accounts receivable, end of year 90,000 Inventory, be ginning of year 110,000 Inventory, end of year

Using vertical analysis of the income statement, a company's net income as a percentage of net sales is 10%; therefore, the income tax expenses as a percentage of net sales must be 90%.

The ability of a business to earn a reasonable amount of income is referred to as the factor of:

Which of the following is not included in the computation of the quick ratio?

"Working capital" is another term for the current ratio.

Based on the following data for the current year, compute the inventory turnover? \ 500,000 Net sales on account during the year 300,000 Cost of merchandise sold during the yeat 45,000 Accounts receivable, be ginning of year 35,000 Accounts receivable, end of year 90,000 Inventory, be ginning of year 110,000 Inventory, end of year

Profitability refers to the ability of the business to:

The percentage analysis of increases and decreases in related items in comparative financial statements is called:

Based on the following data, what is the quick ratio, rounded to one decimal place? \ 32,000 Accounts payable 64,000 Accounts receivable 7,000 Accrued liabilities 20,000 Cash 40,000 Intangible assets 72,000 Inventory 100,000 Long-term investments 75,000 Long-term liabilities 35,000 Marketable securities 25,000 Notes payable (short-term) 625,000 Property, plant, and equipment 2,000 Prepaid expenses

The purpose of an audit is to:

The terms acid-test ratio and quick ratio refer to the same ratio which measures the instant debt-paying ability of a company.

The relationship of $225,000 to $100,000, expressed as a ratio, is:

The rate earned on total assets is one of the measures of profitability.

The ratio of current assets to current liabilities is referred to as the acid-test ratio.

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

The following data are taken from the financial statements: Preceding Current Year Year \ 4,056,000 \ 3,592,000 Net sales 2,656,000 2,092,000 Cost of goods sold 328,000 332,000 Average monthly inventory 347,000 372,000 Inventor, end of year (a)Determine for each year (1) the invent ory tumover and (2) the number of days s ales in inventary. (b)Comment on the favorable and unfavor able trends revealed by the data.