Deck 17: Financial Statement Analysis

Question 1

The audit report in the annual report attests to the fairness of the presentation of the financial statements.

Answer 1

True

Question 2

Ratio analysis is used most effectively to measure a company against other companies in different industries.

Answer 2

False

Question 3

To accurately determine the financial performance of a company,it is necessary to compare the company's performance ________.

A) with a competing company
B) to the budget
C) with companies in different industries
D) only with profitable companies

Answer 3

A

Question 4

An external auditor is responsible for assessing the effectiveness of a company's internal controls.

Question 5

List the three ways to analyze financial statements.State what each of these ways provides to investors and creditors.

Question 6

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K.

Question 7

To accurately determine the financial performance of a company,it is necessary to compare its performance from year to year,with a competing company,and with the same industry as a whole.

Question 8

Management's discussion and analysis of financial condition and results of operations section of the annual report is the company's attempt to explain its financial statements and discuss its performance.

Question 9

A summary of significant accounting policies and explanations of specific items on the financial statements are included in ________.

A) the balance sheet
B) the income statement
C) the notes to financial statements
D) the report of the independent registered public accounting firm

Question 10

The audit report in the annual report is prepared by an internal auditor of a company.

Question 11

An adverse opinion is issued if the auditor finds that the financial statements are not presented fairly.

Question 12

Which of the following is NOT a way to accurately determine the financial performance of a company?

A) carefully examining one year of data
B) evaluating a company's performance from year to year
C) comparing a company's performance with a competing company
D) comparing a company's performance with the same industry as a whole

Question 13

Investors and creditors cannot evaluate a company by examining only one year of data.

Question 14

Investors and creditors can evaluate a company by examining only one year of data.

Question 15

The income statement is also known as the ________.

A) statement of operations
B) statement of cash flows
C) statement of stockholders' equity
D) statement of financial position

Question 16

Ratio analysis ________.

A) cannot be used to evaluate a company's financial condition
B) is used most effectively to compare a company against other companies in the same industry and to denote trends within the company
C) cannot be used to compare a company against other companies in the same industry because the necessary information is not available
D) cannot be used to evaluate a company's performance

Question 17

An annual report provides information about a company's financial condition.

Question 18

Horizontal analysis provides a year-to-year comparison of a company's performance in different periods.

Question 19

In an audit report in the annual report,a qualified opinion states that the financial statements are presented fairly in all material respects.

Question 20

There are three main ways to analyze financial statements.Which of the following does NOT represent one of these ways of analyzing financial statements?

A) horizontal analysis
B) ratio analysis
C) financial statement analysis
D) vertical analysis

Question 21

Which of the following best describes horizontal analysis?

A) comparing financial statement line items from year to year for the same company
B) expressing each financial statement amount as a percentage of a budgeted amount
C) comparing a company's financial statements with other companies
D) calculating key ratios to evaluate performance

Question 22

What is an annual report? Briefly describe the key parts of the annual report.

Question 23

Provide a description of the contents of each of the following components of the annual report.
$$\begin{array} { | l | l | } \hline \text { Annual Report Component } & \text { Description of the contents } \\\hline \text { Financial statements } & \\\hline \text { Report of independent } & \\\text { registered public accounting } & \\\text { firm } & \\\hline\end{array}$$

Question 24

Provide a description of the contents of each of the following components of the annual report.
$$\begin{array} { | l | l | } \hline \text { Annual Report Component } & \text { Description of the contents } \\\hline \text { MD\&A } & \\\hline \text { Notes to financial statements } & \\\hline\end{array}$$

Question 25

McDonald Corp.reported the following on its comparative income statement (in millions):
$$\begin{array} { l l l l } & 2019 & 2018 & 2017 \\\text { Revenue } & \$ 72 8 & \$ 675 & \$ 500 \\\text { Cost of goods sold } & 312 & 258 & 220\end{array}$$ Prepare a horizontal analysis of revenues and cost of goods sold,both in dollar amounts and in percentages,for 2019 and 2018.(Round your percentage answers to two decimal places.)

Question 26

The auditor's report ________.

A) attests that the financial statements are error-free
B) is prepared by the internal auditors
C) states whether the financial statements are presented in accordance with GAAP
D) does not include an assessment of the effectiveness of the company's internal controls

Question 27

The horizontal analysis is computed by which of the following formulas?

A) ((earlier period amount - later period amount)/base period amount) × 100
B) (later period amount/earlier period amount) × 100
C) (base period amount/dollar amount of change) × 100
D) (dollar amount of change/base period amount) × 100

Question 28

Which of the following is used to determine how the sales revenue of a company has changed from one year to the next?

A) vertical analysis of the balance sheet
B) horizontal analysis of the income statement
C) horizontal analysis of the balance sheet
D) vertical analysis of the income statement

Question 29

Which of the following is NOT a part of a corporation's annual report?

A) report of independent registered public accounting firm
B) MD&A
C) notes to financial statements
D) employees' pay rates

Question 30

The following is a summary of information presented on the financial statements of a company on December 31,2019. $$\begin{array} { | l | r | r | } \hline { \text { Account } } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \\\hline \text { Net Sales Revenue } & \$ 605,000 & \$ 504,000 \\\hline \text { Cost of Goods Sold } & \underline { 457,000 } & \underline { 402,000 } \\\hline \text { Gross Profit } & \$ 148,000 & \$ 102,000 \\\hline \text { Selling Expenses } & \underline { 50,000 } & \underline { 53,000 } \\\hline \text { Net Income Before Income Tax Expense } & \$ 98,000 & \$ 49,000 \\\hline \text { Income Tax Expense } & \underline { 37,000 } & \underline { 20,000 } \\\hline \text { Net Income } & \$ 61,000 & \$ 29,000 \\\hline\end{array}$$ With respect to net income,a horizontal analysis reveals ________.(Round your answer to two decimal places.)

A) that net income is 11.03% of net sales revenue
B) a $29,000 increase in net income
C) a 110.34% decrease in net income
D) a 110.34% increase in net income

Question 31

Annual reports ________.

A) are required to be prepared by every corporation
B) discuss the company's competitors and the risks related to the company's business
C) are also called a Form 10-Q
D) only include the company's financial statements

Question 32

Which of the following statements,regarding the management's discussion and analysis (MD&A)part of the annual report is NOT correct?

A) Investors are not interested in the MD&A because it is written by the company and could present a biased view of the company's financial condition and performance.
B) It often contains information that is not found in the financial data.
C) It provides forward-looking formation.
D) The MD&A is the company's attempt to explain its financial statements and to discuss its performance.

Question 33

MacMan,Inc.reported the following data: $\begin{array}{|l|r|r|r|r|}\hline &2019 & 2018 & \text { Amount } & \text { Percentage } \\\hline\text { Revenues } & \$ 6370 & \$ 4980 & \$ 1390 & 27.91 \% \\\hline \text { Cost of goods sold } & 3370 & \underline{2500} & \underline{870} & 34.80 \% \\\hline \text { Gross profit } & 3000 & 2480 & 520 & 20.97 \% \\\hline \text { Operating expenses: } & & & & \\\hline \text { Sales and marketing expense } & 730 & 630 & 100 & 15.87,00 \% \\\hline\text { General and administrative } & 420 & 440 & -20 & -4.55 \% \\\text { expenses } & & & & \\\hline \text { Research and development } \\\text { expense } & 470 & 410 & 60 & 14.63 \%\\ \hline\text { Other expense }& 430 & 730 & (300) & (41.10) \%\\\hline \text { Total operating expenses } & \underline{2050} & 2210 & (160) & (7.24) \% \\\hline \text { Income before income tax } & 950 & 270 & 680 & 251.85 \% \\\hline \text { Income tax expense } & \underline{260} & \underline{250} & \$ 10 & 4 \% \\\hline \text { Net income (loss) } & \$ 690 & \$ 20 & \$ 670 & 3350 \% \\\hline\end{array}$
The horizontal analysis shows that cost of goods sold has ________.(Round your answer to two decimal places.)

A) increased by 27.91%
B) decreased by 27.91%
C) increased by 34.80%
D) decreased by 34.80%

Question 34

Horizontal analysis is computed by dividing a specific statement line item by its base amount and then multiplying by 100.

Question 35

Horizontal analysis is the study of percentage changes in line items in comparative financial statements.

Question 36

Data for Kahn,Inc.follows:
Kahn, Inc.
Comparative Income Statement
Years Ended Dec. 31, 2019 and 2018
$$\begin{array} { l l l } & 2019 & 2018 \\\text { Net Sales Reverue } & \$ 550,000 & \$ 500,000\end{array}$$ Expenses:
$\begin{array}{lll}\text { Cost of Goods Sold } & 245,000 & 220,000 \\\text { Selling and Administrative Expenses } & 100,000 & 96,000 \\\text { Other Expenses (Interest Expense) } & 12,000 & 9,000 \\\text { Income Tax Expense } & \underline{58,000} & \underline{47,000} \\\text { Total Expenses } & \underline{\$ 415,000} & \$ 372,000 \\\text { Net Income } & \$ 135,000 & \$ 128,000\end{array}$
Prepare a horizontal analysis of the comparative income statement of Kahn,Inc.(Round to one decimal place.)Use a multi-step format for the income statement.

Question 37

Horizontal analysis compares each item in the income statement to the net sales amount.

Question 38

Data for Sherwood,Inc.for the years ended December 31,2019 and 2018 are as follows:
$$\begin{array} { l l l } & \underline { 2019 } & \underline { 2018} \\\text { Net Sales }& \$ 850,000 & \$ 798,000 \\\text { Cost of Goods Sold } & 635,000 & 580,000 \\ \text { Selling and Administrative Expenses } & 50,000 & 35,000 \\\text { Other Expenses (Interest Expense) } & 20,000 & 15,000 \\\text { Income Tax }& 40,000 & 55,000\end{array}$$ Prepare a horizontal analysis of the comparative income statement of Sherman,Inc.(Round to one decimal place.)Use a multi-step income statement.

Question 39

The following is a summary of information presented on the financial statements of a company on December 31,2019. $$\begin{array} { | l | r | r | } \hline { \text { Account } } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \\\hline \text { Net Sales Revenue } & \$ 601,000 & \$ 503,000 \\\hline \text { Cost of Goods Sold } & 457,000 & \underline { 406,000 } \\\hline \text { Gross Profit } & 144,000 & 97,000 \\\hline \text { Selling Expenses } & \underline { 53,000 } & \underline { 55,000 } \\\hline \text { Net Income Before Income Tax Expense } & 91,000 & 42,000 \\\hline \text { Income Tax Expense } & \underline { 42,000 } & \underline { 20,000 } \\\hline \text { Net Income } & \$ 49,000 & \$ 22,000 \\\hline\end{array}$$ With respect to net sales revenue,a horizontal analysis reveals ________.

A) a 19.48% increase in net sales revenue
B) a 237.77% decrease in net sales revenue
C) a decrease of $51,000 in net sales revenue
D) a $51,000 increase in net sales revenue

Question 40

Horizontal analysis compares the change in each statement item from one year to the next.

Question 41

Data for Gobell,Inc.follow:
Assets
Current Assets:
$\text {Gobell, Inc.}$
$\text {Comparative Balance Sheet}$
$\text {December 31,2019 and 2018}$
$\begin{array} { l l l } &2019&2018\\\text { Cash } & \$ 121,000 & \$ 100,000 \\\text { Accounts Receivables, Net } & 117,000 & 125,000 \\\text { Merchandise Inventory } & 70,000 & \$ 5,000 \\\text { Total Assets } & \$ 30 \mathrm {~B} , 000 & \$ 310,000\end{array}$ Liabilities
$$\begin{array} { l l l } \text { Total Current Liabilities } & \$ 63,500 & \$ 50,000 \\\text { Long-term Liabilities } & \underline { 100,000 } & \underline { 100,000 } \\\text { Total Liabilities } & \underline { 163,500 } & \underline { 150,000 }\end{array}$$ Stockholders' Equity
$\begin{array}{lll}\text { Preferred Stock } & 94,500 & 110,000 \\\text { Common Stockholders' Equity } & \underline{50,000} & \underline{50,000} \\\text { Total Liabilities and Stockholders' Equity } & \underline{\$ 308,000} & \underline{\$ 310,000}\end{array}$
Prepare a horizontal analysis of the comparative balance sheet of Gobell,Inc.(Round to one decimal place.)

Question 42

The following is a summary of information presented on the financial statements of a company on December 31,2019. $$\begin{array} { | l | r | r | } \hline{ \text { Account } } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \\\hline \text { Current Assets } & \$ 88,000 & \$ 80,000 \\\hline \text { Accounts Receivable } & 94,000 & 67,000 \\\hline \text { Merchandise Inventory } & 62,000 & 58,000 \\\hline \text { Current Liabilities } & 56,000 & 49,000 \\\hline \text { Long-term Liabilities } & 44,000 & 53,000 \\\hline \text { Common Stock } & 76,000 & 57,000 \\\hline \text { Retained Earnings } & 68,000 & 46,000 \\\hline\end{array}$$ With respect to long-term liabilities,a horizontal analysis reveals ________.

A) long-term liabilities decreased by $19,000
B) long-term liabilities decreased by 33.33%
C) long-term liabilities decreased by 16.98%
D) long-term liabilities decreased by $7000

Question 43

The trend analysis report of Poplar,Inc.is given below (in millions): $$\begin{array} { | l | r | r | r | r | r | } \hline &{ 2019 } & { 2018 } & 2017 &{ 2016 } & 2015 \\\hline \text { Net income } & \$ 700 & \$ 606 & \$ 470 & \$ 405 & \$ 402 \\\hline \text { Trend percentages } & 174 \% & 151 \% & 117 \% & 101 \% & 100 \% \\\hline\end{array}$$ Which of the following is a correct conclusion from the above analysis?

A) Net income for 2019 is 174% of net income for 2015.
B) Net income for 2018 is 151% of the previous year.
C) Net income for 2018 decreased by 151% from 2017.
D) Net income for 2019 increased by 174% from 2018.

Question 44

A vertical analysis percent is computed by dividing the base amount by the specific item and then multiplying by 100.

Question 45

The following is summary of information presented on the financial statements of a company on December 31,2019. $$\begin{array} { | l | r | r | } \hline { \text { Account } } & { \mathbf { 2 0 1 9 } } & { \mathbf { 2 0 1 8 } } \\\hline \text { Current Assets } & \$ 70,000 & \$ 52,000 \\\hline \text { Accounts Receivable } & 81,000 & 75,000 \\\hline \text { Merchandise Inventory } & 54,000 & 44,000 \\\hline \text { Current Liabilities } & 78,000 & 47,000 \\\hline \text { Long-term Liabilities } & 30,000 & 52,000 \\\hline \text { Common Stock } & 52,000 & 45,000 \\\hline \text { Retained Earnings } & 45,000 & 27,000 \\\hline & & \\\hline \text { Net Sales Revenue } & \$ 529,000 & \$ 502,000 \\\hline \text { Cost of Goods Sold } & \underline { 402,000 } & \underline { 402,000 } \\\hline \text { Gross Profit } & \$ 127,000 & \$ 100,000 \\\hline \text { Selling Expenses } & \underline { 49,000 } & \underline { 51,000 } \\\hline \text { Net Income Before Income Tax Expense } & \$ 78,000 & \$ 49,000 \\\hline \text { Income Tax Expense } & \underline { 24,000 } & \$ 16,800 \\\hline \text { Net Income } & \underline { \$ 54,000 } & \underline { \$ 32,200 } \\\hline\end{array}$$ With respect to current liabilities,a horizontal analysis reveals ________.(Round your answer to two decimal places.)

A) that current liabilities are 38.05% of total equity
B) a 65.96% increase in current liabilities
C) a current ratio of 0.90
D) a 39.74% increase in current liabilities

Question 46

Sapphire Corp.reported the following revenues and net income amounts.
$\begin{array}{llllll} & \underline{2019} & \underline{2018} & \underline{2017} & \underline{2016} & \underline{2015} \\\text { Revenue } & \$ 728 & \$ 675 & \$ 500 & \$ 485 & \$ 452 \\\text { Cost of goods sold } & 650 & 602 & 456 & 403 & 398\end{array}$
Calculate Sapphire's trend analysis for revenues and cost of goods sold.Use 2015 as the base year,and round to the nearest percent.

Question 47

Night Owl,Inc.reported the following data: The horizontal analysis shows that the amount of total liabilities has ________.

A) increased by $22,800
B) increased by $2400
C) decreased by $2400
D) increased by $24,000

Question 48

The trend analysis report of Marswell,Inc.is given below (in millions): $$\begin{array} { | l | r | r | r | r | r | } \hline & { 2019 } & { 2018 } & 2017 &{ 2016 } & 2015 \\\hline \text { Net income } & \$ 650 & \$ 602 & \$ 460 & \$ 403 & \$ 401 \\\hline \text { Trend percentages } & 162 \% & 150 \% & 115 \% & 100 \% & 100 \% \\\hline\end{array}$$ Which of the following is a correct conclusion from the above analysis?

A) Net income for 2017 has increased by 115% over that for 2015.
B) Net income for 2017 has decreased by 15% over that for 2015.
C) Net income for 2017 has decreased by 115% over that for 2015.
D) Net income for 2017 has increased by 15% over that for 2015.

Question 49

The horizontal analysis of the balance sheet is based on the comparative balance sheet.

Question 50

In a vertical analysis of the income statement,each line item is shown as a percentage of net sales revenue.

Question 51

Vertical analysis involves comparing an amount for a line item in the financial statements with a corresponding amount for the line item of the previous year.

Question 52

Which of the following best describes trend analysis?

A) calculating key ratios to evaluate performance
B) expressing each financial statement amount as a percentage of a budgeted amount
C) comparing a company's financial statements with that of other companies
D) expressing each year's financial statement line item as a percentage of the base year amount

Question 53

Data for Michelle,Inc.follow:
Assets
Current Assets:
$\begin{array}{c}\text { Michelle, Inc.}\\\text { Comparative Balance Sheet}\\\text { December 31, 2019 and 2018}\\\begin{array}{lll}&2019&2018\\\text { Cash } & \$ 12,000 & \$ 10,200 \\\text { Accounts Receivable, Net } & 16,100 & 16,800 \\\text { Merchandise Inventory } & 45,000 & 31,000 \\\text { Prepaid Expenses } & \underline{6,500} & \underline{3,900} \\\text { Total Current Assets } & 79,600 & 61,900 \\\text { Property, Plant, and Equipment, Net } & \underline{265,000} & \underline{233,000} \\\text { Total Assets } & \$ 344,600 & \$ 294,900\end{array}\end{array}$
Liabilities
$\begin{array}{lll}\text { Total Current Liabilities } & \$ 9,900 & \$ 11,200 \\\text { Long-term Liabilities } & \underline{60,000} & \underline{50,000} \\\text { Total Liabilities } & \underline{69,900} & 61,200\end{array}$
Stockholders' Equity
$$\begin{array} { l l l } \text { Preferred Stock, 3\%, } \$ 50 \text { par } & 75,000 & 75,000 \\\text { Common Stockholders' Equity, no par } & \underline { 199,700 } & 1 58, 700 \\\text { Total Liabilities and Stockholders' Equity } & \$344,600 & \$ 294,900\end{array}$$ Prepare a horizontal analysis of the comparative balance sheet of Michelle,Inc.(Round to one decimal place.)

Question 54

A trend analysis would be used if an analyst wants to see how the gross profit of a company has changed from one year to the next.

Question 55

In a vertical analysis of the balance sheet,each line item is shown as a percentage of stockholders' equity.

Question 56

The horizontal analysis of the balance sheet shows the changes in net sales and net income.

Question 57

A horizontal analysis would be used if an analyst wants to see how the assets of a company have changed from one year to the next.

Question 58

A vertical analysis of a financial statement reveals the relationship of each statement item to its base amount,which is the 100% figure.

Question 59

Beary,Inc.provides the following historical data:
$$\begin{array} { l l l l l l l } & 2019 & 2018 & 2017 & 2016 & 2015 & 2014 \\\text { Net sales } & \$ 4,970 & \$ 4,500 & \$ 3,980 & \$ 3,270 & \$ 4,750 & \$ 4,400\end{array}$$ Prepare the trend analysis report.Use 2014 as the base year,and round answers to the nearest percent.

Question 60

Trend analysis is a form of horizontal analysis.

Question 61

When performing vertical analysis of a balance sheet,the base amount is ________.

A) total assets
B) total cash and cash equivalents
C) net income
D) gross profit

Question 62

In 2018,Spirit Company's net income was 10% of net sales revenue.In 2019,the net income was 5% of net sales revenue.There is no need for investors to be alarmed because a drop from 10% to 5% is not significant.

Question 63

Dollar value bias is the bias one sees from comparing numbers in relative (dollars)rather than absolute (percentage)terms.

Question 64

Prepare a vertical analysis for the balance sheet data given below.(Round to two decimal places.)
Petals, Inc.
Balance Sheet
December 31, 2019 Assets
Current Assets:
$$\begin{array} { l l } \text { Cash and Cash Equivalents } & \$ 10,000 \\\text { Accounts Receivable, Net } & 15,600 \\\text { Merchandise Inventory } & \underline { 38,000 } \\\text { Total Cument Assets } & 63,600 \\\text { Long-term Invetments } & 15,000 \\\text { Property, Plant, and Equipment, Net } & \$ 195,000 \\\text { Total Assets } & \$ 273,600\end{array}$$ Liabilities
Current Liabilities:
$\begin{array}{ll}\text { Accounts Payable } & \$ 8,500 \\\text { Notes Payable } & \underline{1,400} \\\text { Total Current Liabilities } & 9,900 \\\text { Long-term Liabilities } & \underline{54,000} \\\text { Total Liabilities } & 63,900\end{array}$
Stockholders' Equity
$$\begin{array} { l l } \text { Common Stcck } & 161,000 \\\text { Retained Earnings } & \underline { 48,700 } \\\text { Total Stockholders' Equity } & \underline { 209,700 } \\\text { Total Liabilities and Stockholders' Equity } & \$ 273,600\end{array}$$

Question 65

Shelcal,Inc.provides the following data for the year 2019: $$\begin{array} { | l | r| } \hline \text { Net Sales Revenue } & 437,690 \\\hline \text { Cost of Goods Sold } & 255,000 \\\hline\end{array}$$ The cost of goods sold as a percentage of net sales revenue is ________.(Round your answer to two decimal places.)

A) 58.46%
B) 58.57%
C) 57.95%
D) 58.26%

Question 66

The vertical analysis of the income statement of Bates,Inc.is as shown below: The figure 47.0% shown for gross profit in 2019 signifies that the gross profit is ________.

A) equal to 47.0% of net income
B) increased by 47.0% over the previous year
C) 47.0% of net sales revenue
D) 47.0% of cost of goods sold

Question 67

For the vertical analysis of the balance sheet,the base amount is also the total of liabilities and stockholders' equity.

Question 68

Reliable Moving Company reported the following amounts on its balance sheet as of December 31,2019 and December 31,2018: $$\begin{array} { | l | r | r | } \hline &{ 2019 } & { 2018 } \\\hline \text { Cash and Receivables } & \$ 135,000 & \$ 135,000 \\\hline \text { Merchandise Inventory } & 185,000 & 150,000 \\\hline \text { Property, Plant and Equipment, net } & 780,000 & 740,000 \\\hline \text { Total Assets } & \$ 1,100,000 & \$ 1,025,000 \\\hline \text { Total Liabilities } & \$ 435,000 & \$ 465,000 \\\hline\end{array}$$ For the vertical analysis,what is the percentage of total liabilities for December 31,2018? (Round your answer to two decimal places.)

A) 100.00%
B) 39.55%
C) 29.03%
D) 45.37%

Question 69

Which of the following is used to see how a company's operating expenses,as a percentage of net sales,have changed from one year to the next?

A) vertical analysis
B) horizontal analysis
C) ratio analysis
D) analysis of internal control system

Question 70

In a vertical analysis of the income statement,each line item is shown as a percentage of net income.

Question 71

In a vertical analysis of the balance sheet,the base amount is total liabilities.

Question 72

When performing vertical analysis of an income statement,the base amount is ________.

A) total expenses
B) net sales revenue
C) sales revenue
D) gross profit

Question 73

Allstate Moving Company reported the following amounts on its balance sheet as of December 31,2019 and December 31,2018: $$\begin{array} { | l | r | r | } \hline & { 2019 } & { 2018 } \\\hline \text { Cash and Receivables } & \$ 165,000 & \$ 75,000 \\\hline \text { Merchandise Inventory } & 175,000 & 250,000 \\\hline \text { Property, Plant and Equipment, net } & 820,000 & 780,000 \\\hline \text { Total Assets } & \$ 1,160,000 & \$ 1,105,000 \\\hline \text { Total Liabilities } & \$ 475,000 & \$ 385,000 \\\hline\end{array}$$ For the vertical analysis,what is the percentage of current assets as of December 31,2019? (Round your answer to two decimal places.)

A) 29.31%
B) 29.41%
C) 41.67%
D) 41.46%

Question 74

The vertical analysis of the income statement of Settler,Inc.is as shown below: The 20% shown for net income in 2019 signifies that net income ________.

A) is 20% of net sales revenues
B) increased by 20% over the previous year
C) is 20% of gross profit
D) equals 20 times of the income before income tax

Question 75

A common-size statement reports the same percentages that appear in a vertical analysis.

Question 76

Martin Company's cost of goods sold is 40% of net sales revenue.This means that for every $1 of net sales revenue,Martin has $0.60 of gross profit.

Question 77

Glasgow,Inc.provides the following:
$\begin{array}{c}\text { Glasgow, Inc.}\\\text { Comparative Balance Sheet}\\\text { December 31,2019 and 2018}\\\begin{array}{|l|r|r}\hline &2019&2018\\\hline \text { Assets } & & \\\hline \text { Total Current Assets } & \$ 200,000 & \$ 100,000 \\\hline \text { Property, Plant, and Equipment, Net } & 550,000 & 500,000 \\\hline \text { Other Assets } & 50,000 & 50,000 \\\hline \text { Total Assets } & \$ 800,000 & \$ 650,000\\\hline \text { Liabilities } & & \\\hline \text { Total Current Liabilities } & \$ 150,000 & \$ 100,000 \\\hline \text { Long-term Liabilities } & 350,000 & 250,000 \\\hline \text { Total Liabilities } & 500,000 & 350,000 \\\hline\text { Stockholders' Equity } & & \\\hline \text { Total Stockholder's' Equity } & \underline{300,000} & 300,000 \\\hline \text { Total Liabilities and Stockholder's' Equity } & \$ 800,000 & \$ 650,000\\\hline \end{array}\end{array}$
Perform a vertical analysis of Glasgow's balance sheet for each year.(Round to one decimal place.)

Question 78

Modern Moving Company reported the following amounts on its balance sheet as of December 31,2019 and December 31,2018: $$\begin{array} { | l | r | r | } \hline & { 2019 } & { 2018 } \\\hline \text { Cash and Receivables } & \$ 155,000 & \$ 145,000 \\\hline \text { Merchandise Inventory } & 205,000 & 160,000 \\\hline \text { Property, Plant and Equipment, net } & 850,000 & 730,000 \\\hline \text { Total Assets } & \$ 1,210,000 & \$ 1,035,000 \\\hline \text { Total Liabilities } & \$ 535,000 & \$ 475,000 \\\hline\end{array}$$ For the vertical analysis,what is the percentage of stockholders' equity as of December 31,2019? (Round your answer to two decimal places.)

A) 100.00%
B) 54.11%
C) 55.79%
D) There is not enough information provided to make this computation.

Question 79

Prepare a vertical analysis of the income statement shown below.(Round to two decimal places.)
Buckner, Inc.
Income Statement
For the Year Ended December 31, 2019 $$\begin{array} { l l } \text { Net Sales } & \$ 7,000 \\\text { Cost of Goods Sold } & 3,800 \\\text { Gross Profit } & 3,200\end{array}$$ Operating Expenses:
$$\begin{array} { l l } \text { Selling Expenses } & 950 \\\text { Administrative Expenses } & \underline { 670 } \\\text { Total Operating Expenses } & \underline { 1,620 } \\\text { Operating Income } & 1,580\end{array}$$ Other Income and (Expenses):
$\begin{array}{ll}\text { Interest Expense } & \underline{(750)} \\\text { Total Other Income and (Expenses) } &\underline{(750)} \\\text { Income Before Income Taxes } & \underline{150}\\\text { Income Tax Expense } & \underline{\$ 680} \\\text { Net Income }\end{array}$

Question 80

Mercer,Inc.provides the following data for 2019: $$\begin{array} { | l | r | } \hline \text { Net Sales Revenue } & 598,000 \\\hline \text { Cost of Goods Sold } & 360,000 \\\hline\end{array}$$ The gross profit as a percentage of net sales is ________.(Round your answer to two decimal places.)

A) 37.96%
B) 39.80%
C) 60.20%
D) 40.8%