Question 1

The current year-end balance sheet data for a company are shown below:
 $\begin{array}{|l|r|}
\hline \text { Assets: } & \
\hline \text { Cash } & \$ 18,000 \
\hline \text { Marketable securities } & 45,000 \
\hline \text { Accounts receivable (net) } & 157,500 \
\hline \text { Merchandise inventory } & 139,500 \
\hline \text { Long-term investments } & 135,000 \
\hline \text { Plant assets (net) } & 517,500 \
\hline \text { Total assets } & \$ 1,012,500\
\hline \
\hline \text { Liabilities and equity: } & \
\hline \text { Accounts payable } & \$ 168,700 \
\hline \text { Acctued liabilities } & 90,000 \
\hline \text { Notes payable (secured by plant assets) } & 234,800 \
\hline \text { Common stock ( } \$ 12 \text { par) } & 180,000 \
\hline \text { Contributed capital in excess of par } & 135,000 \
\hline \text { Retained earnings } & 204,000 \
\hline \text { Total liabilities and equity } & \$ 1,012,500 \
\hline
\end{array}$
 
Calculate this company's:
(1)Working capital.
(2)Acid-test ratio.

Accepted Answer

The answer of The current year-end balance sheet data for...

Question 2

A company has a current ratio of 1.92,total liabilities of $193,849,long-term notes payable of $85,791,a quick ratio of .96.What is the total of the current assets for the company?

Accepted Answer

The answer of A company has a current ratio of...

Question 3

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Accepted Answer

A) True 
 B)False

Question 4

Profitability is the company's ability to generate future revenues and meet long-term financial obligations.

Accepted Answer

A) True 
 B)False

Question 5

A company has an inventory turnover ratio of 2.81,merchandise inventory for 2011 is $93,303,and average inventory of $83,397.What is the cost of goods sold?

Accepted Answer

The answer of A company has an inventory turnover ratio...

Question 6

The return on total equity measures a company's success in reaching the goal of earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 7

Corona Company's balance sheet accounts follow:
$\begin{array}{lrrr}
 \text { At December 31}&2011&2010&2009\
 \text {  Assets}\
 \text { Cash } & \$ 25,868 & \$ 31,163 & \$ 31,182 \
 \text { Accounts receivable, net } & 78,034 & 53,995 & 41,152 \
 \text { Merchandise inventory } & 95,120 & 73,491 & 46,095 \
\text { Prepaid expenses } & 8,330 & 8,099 & 3,429 \
 \text { Plant assets,net } & 241,854 & 218,932 & 199,542 \
 \text { Total assets } & \$ 449,206 & \$ 385,680 & \$ 321,400 \
\text { Liabilities and Equity } & & & \
\text { Accounts payable } & \$ 108,058 & \$ 67,135 & \$ 42,849 \
\text { Long-term notes payable secured by mortgages on } & & & \
\text { plant assets } & 85,791 & 87,819 & 71,029 \
 \text { Common stock, } \$ 10 \text { par value } & 162,500 & 162,500 & 162,500 \
\text { Retained earnings } &92,857 & 68,226 & 45,022 \
\text { Total liabilities and equity } &\$449,206 & \$ 385,680 & \$ 321,400 \
\end{array}$

What is Corona Company's days' sales uncollected ratio for 2011 assuming net sales and gross profit for the period were $1,236,783,$927,587 respectively?

Accepted Answer

A) 25.20 
B) 23.03 
C) 20.99 
D) 24.58 
E) 22.17

Question 8

Comparative calendar year financial data for a company are shown below:
 $\begin{array}{|l|r|r|}
\hline \text { Sales } & \$ 720,000 & \$ 607,500 \
\hline \text { Gross profit } & 270,000 & 224,800 \
\hline \text { Income before taxes } & 79,200 & 78,700 \
\hline \text { Net income } & 51,200 & 51,700 \
\hline\
\hline &\text { December 31, } & \text { December 31, } \
&2011 & 2010 \
\hline \text { Liabilities } & \$ 493,500 & \$ 452,500 \
\hline \text { Common stock }(\$ 12 \text { par }) & 180,000 & 180,000 \
\hline \text { Contributed capital in excess of par } & 135,000 & 135,000 \
\hline \text { Retained earnings } & \underline{204,000} & \underline{177,300} \
\hline \text { Total liabilities and equity } & \$ 1.012,500 & \$ 944,800\
\hline
\end{array}$ 
Calculate:
(1)Return on total assets for 2011.
(2)Return on common stockholders' equity for 2011.

Accepted Answer

The answer of Comparative calendar year financial data for a...

Question 9

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

Accepted Answer

A) True 
 B)False

Question 10

A company is preparing a common size balance sheet and wishes the base amount to be the total amount of assets.What are the 2010 and 2011 common-size percents for cash?
$$\begin{array} { | l | r | r | } 
\hline & \mathbf { 2 0 1 0 } &  { \mathbf { 2 0 1 1 } } \
\hline \text { Cash } & \mathbf { 2 1 , 9 0 4 } & \mathbf { \$ 3 2 , 2 0 3 } \
\hline \text { Total curtert assets } & 101,769 & 141,128 \
\hline \text { Propety and equipment } & 112,577 & 202,558 \
\hline \text { Long-tern irvestrments } & 12,700 & 4,344 \
\hline \text { Intarigible assets } & 16,621 & 48,703 \
\hline \text { Other lonp-term assets } & 11,709 & 13,754 \
\hline \text { Total assets } & \$ 255,376 & \$ 410,487 \
\hline
\end{array}$$

Accepted Answer

A) 21.52% in 2010 and 22.82% in 2011 
B) 7.90% in 2010 and 7.27% in 2011 
C) 8.58% in 2010 and 7.85% in 2011 
D) 19.30% in 2010 and 20.79 in 2011 
E) The percent cannot be computed for 2010 and 47.01% in 2011

Question 11

Use the financial data shown below to calculate the following ratios for the current year:
(a)Current ratio.
(b)Acid-test ratio.
(c)Accounts receivable turnover.
(d)Days' sales uncollected.
(e)Inventory turnover.
(f)Days' sales in inventory.
 $$\begin{array}{l}
\begin{array} { | l | r | r | } 
\hline\text { Income statement data }\
\hline \text { Sales } & \$ 650,000 & \
\hline \text { Cost of goods sold } & 425,000 & \
\hline \text { Income before taxes } & 78,000 & \
\hline \text { Net income } & 54,600 & \
\hline & & \
\hline & \text { Ending } & \begin{array} { c } 
\text { Beginning } \
\text { Balances }
\end{array} \
\hline \text { Cash } & \$ 19,500 & \$ 15,000 \
\hline \text { Accounts receivable (net) } & 65,000 & 60,000 \
\hline \text { Inventory } & 71,500 & 64,500 \
\hline \text { Plant and equipment (net) } & \underline { 195,000 } & \underline { 183,900 } \
\hline \text { Total assets } & \$ 351,000 & \$ 323,400 \
\hline & & \
\hline \text { Current liabilities } & \$ 62,400 & \$ 52,700 \
\hline \text { Long-term notes payable } & 97,500 & 100,000 \
\hline
\end{array}
\end{array}$$

Accepted Answer

The answer of Use the financial data shown below to...

Question 12

An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.

Accepted Answer

A) True 
 B)False

Question 13

Oakley Corporation has the following comparative income statements.Which of the following statements is false with regard to this comparative data?
Oakley Corporation
Comparative Income Statements
For years ended December 31,2011 and 2010
$\begin{array}{|l|r|r|}
\hline \text { Sales } & 2011 & {2010} \
\hline \text { Cost of goods sold } & \$ 360,000 & \$ 267,500 \
\hline \text { Gross profit } & 237,600 & 140,170 \
\hline \text { Operating expenses } & 122,400 & 127,330 \
\hline \text { Net income } & \underline{75,600} & \underline{51,895} \
\hline
\end{array}$

Accepted Answer

A) The common-size sales percent for 2011 equals 100% 
B) The common-size net income percent for 2010 equals 28.2% 
C) The common-size gross profit percent for 2011 equals (3.87)% 
D) The common-size cost of goods sold for 2010 equals 52.4% 
E) Statements B and D are false

Question 14

The three most common tools of financial analysis are:

Accepted Answer

A) Financial reporting,ratio analysis,vertical analysis 
B) Ratio analysis,horizontal analysis,financial reporting 
C) Horizontal analysis,vertical analysis,ratio analysis 
D) Trend analysis,financial reporting,ratio analysis 
E) Vertical analysis,political analysis,horizontal analysis

Question 15

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

Accepted Answer

A) $200,000 
B) $500,000 
C) $50,000 
D) $25,000 
E) $175,000

Question 16

Standards for comparison are necessary when making judgments about a company's financial performance.

Accepted Answer

A) True 
 B)False

Question 17

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.

Accepted Answer

A) $50,000 
B) $550,000 
C) $132,000 
D) $10,763,636 
E) $10,000

Question 18

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

A) Financial reporting 
B) Horizontal ratios 
C) Investment analysis 
D) Risk analysis 
E) Vertical analysis

Question 19

Liquidity and efficiency are considered the building blocks of financial statement analysis.

Accepted Answer

A) True 
 B)False

Question 20

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500,how much were net sales?

Accepted Answer

A) $3,200 
B) $500,000 
C) $26,600 
D) $4,156,250 
E) $372,500

Exam 13: Analyzing and Interpreting Financial Statements

A company has a current ratio of 1.92,total liabilities of $193,849,long-term notes payable of $85,791,a quick ratio of .96.What is the total of the current assets for the company?

One purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Profitability is the company's ability to generate future revenues and meet long-term financial obligations.

A company has an inventory turnover ratio of 2.81,merchandise inventory for 2011 is $93,303,and average inventory of $83,397.What is the cost of goods sold?

The return on total equity measures a company's success in reaching the goal of earning net income for its owners.

A company that has days' sales uncollected of 30 days and days' sales in inventory of 18 days implies that inventory will be converted to cash in about 12 days.

An advantage of common-size statements is that they reflect the relative sizes of different companies under analysis.

The three most common tools of financial analysis are:

A company had a return on common stockholders' equity of 25%.Net income equaled $200,000 and average common stockholders' equity equaled $700,000.Compute the amount of the preferred dividends declared.

Standards for comparison are necessary when making judgments about a company's financial performance.

A company had a return on common stockholders' equity of 22%.Net income equaled $600,000 and average common stockholders' equity equaled $2,500,000.Compute the amount of the preferred dividends declared.

The comparison of a company's financial condition and performance to a base amount is known as:

Liquidity and efficiency are considered the building blocks of financial statement analysis.

A company had a profit margin of 8%.If net income equaled $40,000 and average total assets equaled $332,500,how much were net sales?