Exam 9: Financial Statement Analysis

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred as vertical analysis.

The following information is available for Morgan Corporation: 2012 \ 25.00 Market price per share of common stock 1.25 Earnings per share on common stock Which of the following statements is correct?

A company's assets are comprised of the following: Cash, $25,000; Receivables, $5,600; Marketable Securities, $7,200; and Equipment, $65,000. The total of quick assets is $37,800.

Based on the following data for the current year, what is the number of days' sales in inventory (rounded to the next whole day)? \ 1,204,000 Net sales on account during the ye ar 630,000 Cost of merchandise sold chring the year 75,000 Accounts receivable, beginning of year 85,000 Accounts receivable, end of year 81,600 Inventory, beginning of year 98,600 Inventory, end of year

Ratios and various other analytical measures are not a substitute for sound judgment, nor do they provide definitive guides for action.

What type of analysis is indicated by the following? $\begin{array}{|l|c|c|c|c|}\hline\text { Increase (Decrease) }\\\hline \text { Percent } & \text { Amount } & 2012 & 2013 & \\ \hline( 24 \%) & \$(120,000) & \$ 500,000 & \$ 380,000 & \text { Current assets } \\\hline 12 \% & 180,000 & 1.500 .000 & 11.680,000 & \text { Fixed assets }\\\hline\end{array}$

Which one of the following is not a characteristic generally evaluated in ratio analysis?

The independent auditor's report does which of the following?

If a firm has an quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:

Solvency analysis focuses on the ability of a business to make a profit.

Washington Corporation has the following financial data for 2013 and 2012. 2012 2013 ASSSETS Curent Assets: 9,000 \ 37,000 Cash 11,000 8,000 Marketable Securities 25,000 32,000 Accounts Receivable 10,000 13,000 Other Current Assets 55,000 90,000 Total Current Assets 120,000 135,000 Fixed Assets(net) \ 175,000 \ 225,000 Total Assets Liabilities \ 40,000 \ 71,000 Curent Liabilities 35,000 34,000 Long-term Liabilities \ 75,000 \ 105,000 Total Libilities \ 100,000 \ 120,000 Total Stocklohlers'Equity \ 175,000 \ 225,000 Total Linbilities And StockJolders' Equity Based on Washington's current ratio, which of the following statements is true regarding the company?

The balance sheets at the end of each of the first two years of operations indicate the following: 2012 2013 \ 560,000 \ 600,000 Total current assets 40,000 60,000 Total investments 700,000 900,000 Total property, plant, and ecuipment 80,000 125,000 Total current liabilities 250,000 350,000 Total long-term liabilities 100,000 100,000 Preferred 9\% stock \ 100 600,000 600,000 Common stock, \ 10 prr 60,000 60,000 Paid-in capital in excess of par--common stock 210,000 325,000 Retained earnings Based on the above information, if net income is $130,000 and interest expense is $40,000 for 2013, what is the rate earned on common stockholders' equity for 2013 (round to one decimal place)?

The balance sheets at the end of each of the first two years of operations indicate the following: 2012 2013 \ 560,000 \ 600,000 Total current assets 40,000 60,000 Total investments 700,000 900,000 Total property, plant, and ecuipment 80,000 125,000 Total current liabilities 250,000 350,000 Total long-term liabilities 100,000 100,000 Preferred 9\% stock \ 100 600,000 600,000 Common stock, \ 10 prr 60,000 60,000 Paid-in capital in excess of par--common stock 210,000 325,000 Retained earnings Based on the above information, if net income is $130,000 and interest expense is $40,000 for 2013, and the market price is $40, what is the price-earnings ratio on common stock (round to one decimal place)?

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

If the current credit terms are 2/10, n/30 for Jones Inc., an accounts receivable turnover of 3 for the current year would be considered normal.

The percentage change in long-term liabilities between two balance sheet dates is an example of:

Condensed data taken from the ledger of Crawford Company at December 31, 2013 and 2012, are as follows: 2012 2013 \ 180,000 \ 200,000 Current assets 400,000 450,000 Property, plant, and equipment 30,000 20,700 Intangible assets 80,000 70,000 Current liabilities 250,000 200,000 Long term liabilities 200,000 275,000 Common stock 80.000 25,700 Retained earnings Prepare a comparative balance sheet, with horizontal analysis, for December 31, 2013 and 2012. (Round percents to one decimal place.)

Assuming that the quantities of inventory on hand during the current year were sufficient to meet all demands for sales, a decrease in the inventory turnover for the current year when compared with the turnover for the preceding year indicates an improvement in the management of inventory.

An analysis in which all the components of an income statement are expressed as a percentage of net sales is called: