Exam 4: Analyzing Financial Statements

There are people who believe that the analysis of financial statements has limitations. Which of the statements below would qualify as a limitation of financial statement analysis?

Common-size financial statements:

A typical way in which a common-size income statement is constructed is by dividing all expense items in an income statement by net income.

Which one of the following statements about trend analysis is NOT correct?

Ellicott City Manufacturers, Inc., has sales of $6,344,210, and a gross profit margin of 67.3 percent. What is the firm's cost of goods sold? Round your final answer to the nearest dollar.

Dreisen Traders has total debt of $1,233,837 and total assets of $2,178,990. What are the firm's equity multiplier and debt-to-equity ratio? Round your final answers to two decimal places.

If Viera, Inc., has an accounts receivable turnover of 3.9 times and net sales of $3,436,812, what is its level of receivables? Round your final answer to the nearest dollar.

Which of the following is NOT a method of "benchmarking"?

An individual analyzing a firm's financial statements should do all but which one of the following?

Trident Corp., has debt of $3.35 million with an interest rate of 6.875 percent. The company has an EBIT of $2,766,009. What is its times-interest-earned ratio? Round your final answer to nearest number.

Ronaldinho Trading Co. is required by its bank to maintain a current ratio of at least 1.75, and its current ratio now is 2.1. The firm plans to acquire additional inventory to meet an unexpected surge in the demand for its products and will pay for the inventory with short-term debt. How much inventory can the firm purchase without violating its debt agreement, if their total current assets equal $3.5 million? Round your final answer to the nearest dollar.

Peer group analysis can be performed by:

Turnover ratios are useful for managers in identifying inefficient use of current and long-term assets.

In the latest year, Photon, Inc. reported $276,000 in net income. The firm maintains a debt ratio of 30% and has total assets of $3,000,000. What is Photon's return on equity? (Round your percentage answer to one decimal place.)

A firm increased its day's sales outstanding from 35 days to 43 days. This implies the firm is more efficient in collecting the debts.

The three different perspectives on financial statement analysis are those of the:

Which of the following statements is NOT true of the asset turnover ratio?

Which of the following is true about the quick ratio?

The creditors of a firm analyze financial statements so that they can focus on:

Financial statement analysis can help us determine why a firm's cash flows are increasing or decreasing.