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Exam 15: Financial Statement Analysis

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Question 91

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The following information pertains to Brock Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Assets Liabilities and Stockholders' Equity Income Statement $\begin{array}{ll}6,000 & \text { Number of shares of common stock } \\\$ 20 & \text { Market price of common stock }\end{array}$ What is the current ratio for this company?

A) 1.42
B) 0.78
C) 1.58
D) 0.67

E) A) and D)
F) A) and C)

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Question 92

Multiple Choice

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Assume the following sales data for a company: $\begin{array}{ll}750,000 & 2011 \\500,000 & 2010\end{array}$ What is the percentage increase in sales from 2010 to 2011?

A) 25%
B) 66.7%
C) 50%
D) 150%

E) B) and C)
F) B) and D)

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Question 93

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Income statement information for Sharif Corporation is provided below: Required: Prepare a vertical analysis of the income statement for Sharif Corporation.

In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.

From the following data for Norton Company for the year ended December 31, 2012 prepare a multiple-step income statement. Show parenthetically earnings per share for the following: income from continuing operations, loss on discontinued operations (less applicable income tax), income before extraordinary item, extraordinary item (less applicable income tax), and net income.

$\begin{array}{ll}\$ 30,000 & \text { Accounts payable } \\65,000&\text { Accounts receivable } \\7,000 & \text { Acculud liabilities } \\20,000 & \text { Cash } \\40,000 & \text { Intangible assets } \\72,000 & \text { Inventory } \\100,000 & \text { Long-term investments } \\75,000 & \text { Long-term liabilities } \\36,000 & \text { Marketable securities } \\20,000 & \text { Notes payable (short-term) } \\625,000 & \text { Property, plant, and equipment } \\2,000 & \text { Prepaid expenses }\end{array}$ Based on the above data, what is the amount of quick assets?

Corporate annual reports typically do not contain which of the following?

The number of days' sales in receivables is one means of expressing the relationship between average daily sales and accounts receivable.

The Cash and Accounts Receivable for a company are provided below: Based on this information, what is the amount and percentage of increase or decrease that would be shown in a balance sheet with horizontal analysis?

The following data are taken from the balance sheet at the end of the current year. Determine the (a) working capital, (b) current ratio, and (c) quick ratio. Present figures used in your computations. Round ratios to the nearest tenth.

For Garrison Corporation, the working capital at the end of the current year is $10,000 more than the working capital at the end of the preceding year, reported as follows: Required: Has the current position improved? Explain.

If a firm has a current ratio of 2, the subsequent receipt of a 60-day note receivable on account will cause the ratio to decrease.

An extraordinary item must be either unusual in nature or infrequent in occurrence.

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the price earnings ratio for this company? Round your answer to one decimal point.

Comparative information taken from the Koda Company financial statements is shown below: Instructions Using horizontal analysis, show the percentage change from 2011 to 2012 with 2011 as the base year.

In a company's annual report, the section called management discussion and analysis provides critical information in interpreting the financial statements and assessing the future of the company.

What type of analysis is indicated by the following?

The ratio of fixed assets to long-term liabilities provides a measure of a firm's ability to pay dividends.

The auditor's report is where the auditor certifies that the financial statements are correct and accurate.

In the vertical analysis of an income statement, each item is generally stated as a percentage of total assets.