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Exam 12: Financial Statement Analysis

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Question 41

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We use vertical analysis to express each income statement item as a percentage of sales.

A) True
B) False

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Question 42

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Which of the following is correct?

A) Receivables turnover ratio depicts the company's frequency of cash collections.
B) Inventory turnover ratio can be used to assess the company's frequency of selling inventory.
C) Current ratio reflects the company's ability to pay current debt.
D) All of the other options are correct.

E) C) and D)
F) All of the above

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Question 43

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If the base-year amount is zero,we can't calculate a percentage change under horizontal analysis.

Stealth Company's 2013 inventory turnover is:

Stealth Company's 2013 asset turnover is:

Nerf Mania reports net income of $500,000,net sales of $4,000,000,and average assets of $2,000,000.The asset turnover is:

Comparing operating expenses as a percentage of sales is an example of:

The price-earnings (PE)ratio compares a company's share price with its earnings per share.

The location where a loss is reported in the income statement does not really matter as long as the loss is reported.

TPX Company's 2013 asset turnover is:

The following is an example of: $\begin{array} { | l r r | } \hline & \text { Amount } & \% \\\text { Cash } & \$ 300,000 & 6.0 \\\text { Accounts receivable } & 500,000 & \mathbf { 1 0 . 0 } \\\text { Inventory } & 800,000 & \mathbf { 1 6 . 0 } \\\text { Long-term assets } & 3,400,000 & \mathbf { 6 8 . 0 } \\\hline\text { Total assets } & \$ 5,000,000 & \mathbf { 1 0 0 . 0 } \\\hline\end{array}$

If a company's sales are $648,000 in 2012,and this represents an 8% increase over sales in 2011,what were sales in 2011?

Value stocks have lower share prices in relationship to their fundamental ratios,and therefore,trade at lower PE ratios.

Stealth Company's 2013 return on equity is:

We can use ratios to help evaluate a firm's performance and financial position.

Excerpts from TPX Company's December 31, 2013 and 2012, financial statements are presented below: $\begin{array}{lrr}&2013&2012\\\text { Accounts receivable } & \$ 80,000 & \$ 72,000 \\\text { Inventory } & 84,000 & 70,000 \\\text { Net sales } & 400,000 & 372,000 \\\text { Cost of goods sold } & 254,000 & 216,000 \\\text { Total assets } & 850,000 & 810,000 \\\text { Total stockholders' equity } & 500,000 & 450,000 \\\text { Net income } & 75,000 & 56,000\end{array}$ -TPX Company's 2013 average collection period is:

Which of the following is an example of horizontal analysis?

A larger estimation of the allowance for uncollectible accounts,the write-down of overvalued inventory and the use of a shorter useful life for depreciation are all examples of conservative accounting.

Horizontal analysis analyzes trends in financial statement data for a single company over time.

Extraordinary items: