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Exam 23: Financial Statement Analyses

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Question 51

Multiple Choice

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If total merchandise available for sale is 72 percent of net sales and cost of goods sold is 64 percent of net sales,gross profit on sales is

A) 8 percent of net sales.
B) 36 percent of net sales.
C) 28 percent of net sales.
D) 20 percent of net sales.

E) None of the above
F) B) and C)

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Question 52

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Peterson Company has current liabilities of $130,000 and working capital of $32,000.Its current assets therefore must equal $162,000.

A) True
B) False

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Question 53

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A company reported net income of $80,000 for 2016,and net income of $100,000 for 2017.Net income increased by ____________________ percent.

The current ratio measures a company's ability to pay its current debts using current assets.

In horizontal analysis,the base year is the most recent year.

The Terence Hill Company has current assets of $350,000 and a current ratio of .7.Its current liabilities therefore must equal $500,000.

The rate of return on sales measures how effectively management has used the assets of the company.

Using the information given,analyze the liquidity of Quotidian Industries for 2017.

Comparison of amounts and percentages for only two years is adequate to indicate long-term trends.

The rate of ____________________ on total assets measures the earnings on the assets used by a company.

In horizontal analysis,the change from year to year itself can be interpreted to represent the changes in external prices that impact the business.

If current liabilities are $90,000,long-term liabilities are $270,000,and total assets are $600,000,what is the percentage of total liabilities to total assets?

What is the PE ratio? How is it calculated and why is it that the PE ratio for a privately held company often cannot be calculated?

Because the number of shares of common stock outstanding during the year can fluctuate,computing return on common stockholders' equity is not a useful indicator of profitability.

The current ratio is a measure of profitability.

Selected financial ratios are given for Canard Industries and Canaille Manufacturing.Both firms have come to your bank and requested loans.You are a loan officer at Noir Bank but can only loan funds to one of the firms.Make your decision based on the information provided.In a short paragraph,explain the basis for the selection you made.

Using the information shown,prepare a horizontal analysis.Carry all calculations to two decimal places and then round to one decimal place.

As a result of extraordinary losses during the year,the number of times bond interest earned ratio decreased from 4.5 times to 1.5 times.This change is indicative of increasing financial strength.

Simon Company has current liabilities of $30,000 and a current ratio of 1.2.Its current assets therefore must equal $25,000.

A firm has current liabilities of $60,000,stockholders' equity of $180,000 and total assets of $300,000.The percentage of total liabilities to total assets is