Selected data from Carson Corporation's financial statements for the year ended December 31, Year 2 are as follows. $\begin{array}{ll} \text { Current ratio } & 1.4 \\ \text { Quick ratio } & 0.86 \\ \text { Current liabilities } & \$ 450,000 \\ \text { Accounts receivable tumover } & 6.0 \\ \text { Merchandise inventory turnover } & 4.0 \\ \text { Rate of return on assets } & 6.5 \% \end{array}$ $\text { Selected Account Balances at December 31, Year I: }$ $\begin{array}{ll} \text { Accounts receivable } & \$ 355,000 \\ \text { Merchandise inventory } & 190,000 \end{array}$ $\text { Year } 2 \text { Operations }$ $\begin{array}{ll} \text { Sales } & \$ 1,241,000 \\ \text { Cost of goods sold } & 800,000 \end{array}$Assuming that prepaid expenses are immaterial, ending merchandise inventory at December 31, Year 2 is

A) $180,000 B) $210,000 C) $220,000 D) $240,000 E) $260,000 A) $180,000 B) $210,000 C) $220,000 D) $240,000 E) $260,000

What is calculated as follows? $\begin{array} { l } ?&=&\begin{array} { l } \text {Profit Margin for ROA }\\ \text {(before interest expense }\\ \text {and related income }\\ \text {tax savings) Ratio }\\ \end{array}&\times&\begin{array} { l } \text {Total Assets }\\ \text {Turnover}\\ \text {Ratio }\\ \end{array}\\ \end{array}$

A) return on net assets B) return on sales margin C) return on gross margin D) return on assets E) return on net income A) return on net assets B) return on sales margin C) return on gross margin D) return on assets E) return on net income

Exam 7: Introduction to Financial Statement Analysis

For each of the following independent situations, suggest what ratio would provide appropriate information to answer the question. a. You need to determine the number of days outstanding for accounts receivable. b. You are considering investing in bonds of a publicly held company. You wish to analyze the possibility of the company failing to meet required interest payments. c. You wish to measure and compare a firm's performance in using assets independent of the financing of the assets to the industry average. d. You wish to assess a company's ability to meet immediate liabilities in an emergency. e. You would like to determine how much capital is provided by common shareholders. f. You wish to understand how long inventory remains on hand during the period. g. You are considering how much additional long-term debt a company may be able to take on. h. You are interested in how productive a company's fixed assets have been.

(Essay)

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Question 121

Discusses the four measures for assessing short-term liquidity risk.

(Essay)

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Question 122

Three measures of profitability for a firm engaging in operations selling merchandise in its stores, to generate net income are: (1) Rate of return on assets, (2) Rate of return on common shareholders' equity, and (3) Earnings per share of common stock.

(True/False)

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Question 123

Selected data from Carson Corporation's financial statements for the year ended December 31, Year 2 are as follows. Current ratio 1.4 Quick ratio 0.86 Current liabilities \ 450,000 Accounts receivable tumover 6.0 Merchandise inventory turnover 4.0 Rate of return on assets 6.5\% $\text { Selected Account Balances at December 31, Year I: }$ Accounts receivable \ 355,000 Merchandise inventory 190,000 $\text { Year } 2 \text { Operations }$ Sales \ 1,241,000 Cost of goods sold 800,000 Assuming that prepaid expenses are immaterial, ending merchandise inventory at December 31, Year 2 is

(Multiple Choice)

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Question 124

The typical last step in financial statement analysis and valuation (after selecting assumptions) is:

(Multiple Choice)

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Question 125

The typical steps in financial statement analysis and valuation include all of the following, except

(Multiple Choice)

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Question 126

Analysts deciding between investments must consider the comparative risks.Which of the following is/areindustry-wide factors that affect the risk of business firms?

(Multiple Choice)

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Question 127

Analysts deciding between investments must consider the comparative risks.Which of the following is/arefirm-specific factors that affect the risk of business firms?

(Multiple Choice)

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Question 128

Mother's Company has current assets of $900,000 and current liabilities of $1,000,000.Mother's Company's current ratio would be increased by

(Multiple Choice)

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Question 129

What is calculated as follows? ? = Profit Margin for ROA (before interest expense and related income tax savings) Ratio \times Total Assets Turnover Ratio

(Multiple Choice)

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Question 130

What are the limitations of ratio analysis?

(Essay)

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Question 131

Analysts deciding between investments must consider the comparative risks.Which of the following is/are not industry-wide factors that affect the risk of business firms?

(Multiple Choice)

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Question 132

What is the first step in preparing pro forma financial statements?

(Multiple Choice)

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Question 133

Which of the following could affect(s) the fixed asset turnover ratio?

(Multiple Choice)

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Question 134

The traditional use of the term _____ financial statements refers to projected financial statements based on some set of assumptions about the future.One set of assumptions might be that historical patterns (for example, growth rates or rates of return) will continue.

(Multiple Choice)

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Question 135

Analysts deciding between investments must consider the comparative risks.Which of the following is/are not firm-specific factors that affect the risk of business firms?

(Multiple Choice)

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Question 136

Analysts use measures of long-term liquidity risk to evaluate a firm's ability to meet interest and principal payments on long-term debt and similar obligations as they come due.If a firm cannot make the payments on time, it becomes insolvent and may have to reorganize or liquidate.

(True/False)

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Question 137

Most firms want to extend their payables as long as they can, but they also want to maintain their relations with suppliers.Businesses, therefore, negotiate hard for favorable payment terms and then delay paying until just before the last agreed moment.

(True/False)

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Question 138

Why might a firm use the quick ratio instead of the current ratio in its liquidity analysis?

(Multiple Choice)

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Question 139

If the rate of return on assets for the year is 15%, a general interpretation of the ratio would be

(Multiple Choice)

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Question 140

Showing 121 - 140 of 166

Discusses the four measures for assessing short-term liquidity risk.

Three measures of profitability for a firm engaging in operations selling merchandise in its stores, to generate net income are: (1) Rate of return on assets, (2) Rate of return on common shareholders' equity, and (3) Earnings per share of common stock.

The typical last step in financial statement analysis and valuation (after selecting assumptions) is:

The typical steps in financial statement analysis and valuation include all of the following, except

Analysts deciding between investments must consider the comparative risks.Which of the following is/areindustry-wide factors that affect the risk of business firms?

Analysts deciding between investments must consider the comparative risks.Which of the following is/arefirm-specific factors that affect the risk of business firms?

Mother's Company has current assets of $900,000 and current liabilities of $1,000,000.Mother's Company's current ratio would be increased by

What is calculated as follows? ? = Profit Margin for ROA (before interest expense and related income tax savings) Ratio \times Total Assets Turnover Ratio

What are the limitations of ratio analysis?

Analysts deciding between investments must consider the comparative risks.Which of the following is/are not industry-wide factors that affect the risk of business firms?

What is the first step in preparing pro forma financial statements?

Which of the following could affect(s) the fixed asset turnover ratio?

The traditional use of the term _____ financial statements refers to projected financial statements based on some set of assumptions about the future.One set of assumptions might be that historical patterns (for example, growth rates or rates of return) will continue.

Analysts deciding between investments must consider the comparative risks.Which of the following is/are not firm-specific factors that affect the risk of business firms?

Analysts use measures of long-term liquidity risk to evaluate a firm's ability to meet interest and principal payments on long-term debt and similar obligations as they come due.If a firm cannot make the payments on time, it becomes insolvent and may have to reorganize or liquidate.

Most firms want to extend their payables as long as they can, but they also want to maintain their relations with suppliers.Businesses, therefore, negotiate hard for favorable payment terms and then delay paying until just before the last agreed moment.

Why might a firm use the quick ratio instead of the current ratio in its liquidity analysis?

If the rate of return on assets for the year is 15%, a general interpretation of the ratio would be

Introduction to Business Activities and Overview of Financial Statements and the Reporting Process

The Basics of Record Keeping and Financial Statement Preparation: Balance Sheet

The Basics of Record Keeping and Financial Statement Preparation: Income Statement

Balance Sheet: Presenting and Analyzing Resources and Financing

Income Statement: Reporting Results of Operating Activities

Statement of Cash Flows

Revenue Recognition, Receivables, and Advances From Customers

Working Capital

Long-Lived Tangible and Intangible Assets

Notes, Bonds, and Leases

Liabilities: Off-Balance Sheet Financing, Retirement Benefits, and Income Taxes

Marketable Securities and Derivatives

Intercorporate Investments in Common Stock

Shareholders Equity: Capital Contributions and Distributions

Statement of Cash Flows: Another Look

Synthesis and Extensions

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