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Exam 13: Analyzing and Interpreting Financial Statements

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Question 41

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Evaluation of company performance can include comparison and/or assessment of all but which of the following:

A) Past performance.
B) Current performance.
C) Current financial position.
D) Future performance and risk.
E) External user needs and demands.

F) B) and E)
G) B) and C)

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Question 42

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Zhang Company reported Cost of goods sold of $835,000,beginning Inventory of $37,200 and ending Inventory of $46,300.The average Inventory amount is:

A) $37,200.
B) $46,300.
C) $83,500.
D) $41,750.
E) $9,100.

F) B) and E)
G) B) and D)

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Question 43

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The measurement of key relationships between financial statement items is known as ________.

________ ratios include the price-earnings ratio and dividend yield.

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

The purpose of financial statement analysis for external users is to provide information to improve efficiency and effectiveness.

The following current year information is available from a manufacturing company: $\begin{array}{lr}\text { Sales } & \$ 740,000 \\\text { Gross profit on sales } & 276,000 \\\text { Operating income } & 64,000 \\\text { Income before taxes } & 44,000 \\\text { Net income } & 33,600 \\\text { Accounts Receivable, beginning-year } & 58,000 \\\text { Accounts Receivable, end-of-year } & 72,000\end{array}$ Calculate the company's accounts receivable turnover and its days' sales uncollected.

General-purpose financial statements include the (1)________,(2)________,(3)________,(4)________ and (5)________.

Financial statement analysis involves all of the following except:

The debt ratio,the equity ratio,pledged assets to secured liabilities,and times interest earned are all ________ ratios.

Ratios may be expressed as (1)________,(2)________,or (3)________.

The return on total assets ratio is a profitability measure.

Use the following selected information from Wheeler,LLC to determine the 2018 and 2017 trend percentages for cost of goods sold using 2017 as the base. $\begin{array}{lrrl}&2018&&2017\\Net ~sales&\$ 276,200& & \$ 231,400 \\Cost ~of ~goods ~sold&151,90 0 & & 129,590 \\Operatirg ~expenses&55,240 & & 53,240 \\Net ~earmirgs&27,820 & & 19,820\end{array}$

When no value is in the base period,no percent change is computable.

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

The standards for comparisons when interpreting measures from financial statement analysis include (1)________,(2)________,(3)________,and (4)________.

Describe the purpose of vertical financial statement analysis and how it is applied.

Financial reporting includes not only general purpose financial statements,but also information from SEC filings,press releases,shareholders' meetings,forecasts,management letters,auditor's reports,and Webcasts.

Selected current year end financial information for a company is presented below.Calculate the following company ratios: (a)Profit margin. (b)Total asset turnover. (c)Return on total assets. (d)Return on common stockholders' equity (assume the company has no preferred stock). Net income……………………………….. $ 325,000 Net sales………………………………….. 4,700,000 Total liabilities,beginning-year………….. 550,000 Total liabilities,end-of-year……………… 530,000 Total stockholders' equity,beginning-year. 760,000 Total stockholders' equity,end-of-year….. 745,000

Comparative financial statements are reports that show financial amounts in side by side columns on a single statement for analysis purposes.