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Exam 13: Analyzing and Interpreting Financial Statements

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Question 21

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Guidelines (rules-of-thumb) are general standards of comparison developed from:

A) Industry statistics from the government.
B) Past experience.
C) Analysis of competitors.
D) Relations between financial items.
E) Dun and Bradstreet.

F) A) and B)
G) A) and C)

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Question 22

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All of the following statements regarding a business segment are true except:

A) A business segment is a part of a company's operations that serves a particular product line.
B) A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company.
C) A company's gain or loss from selling or closing down a segment is reported separately.
D) The income tax effects of a discontinued segment are combined with income tax from continuing operations.
E) A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.

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

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Question 23

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If a company is comparing this year's financial performance to last year's financial performance, it is using horizontal analysis.

The return on total assets ratio is a profitability measure.

All of the following are true of financial statement analysis reports, except:

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

Refer to the following selected financial information from McCormik, LLC. Compute the company's accounts receivable turnover for Year 2.

The current ratio is calculated as current liabilities divided by current assets.

When a company's activities include income-related events not part of normal, continuing operations, the complete income statement could potentially have the following sections:

Standards for comparison are not generally necessary when making judgments about a company's performance.

Use the following selected information from Wheeler, LLC to determine the 2017 and 2016 trend percentages for cost of goods sold using 2016 as the base.

The background on a company, its industry, and its economic setting is usually included in which of the following sections of a financial statement analysis report?

The following information is available for the Marr Corporation: Calculate the company's accounts receivable turnover and its days' sales uncollected.

Refer to the following selected financial information from McCormik, LLC. Compute the company's inventory turnover for Year 2.

The evaluation of company performance and financial condition includes evaluation of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

A rough guideline states that for a company with no discounts offered, days' sales uncollected should not exceed 1 1/3 times the days in its credit period.

For the following financial statement items, calculate trend percentages using 2014 as the base year:

A company's calendar-year financial data are shown below. The company had total assets of $339,000 and total equity of $144,400 for the prior year. No additional shares of common stock were issued during the year. The December 31 market price per share is $49.50. Cash dividends of $19,500 were paid during the year. Calculate the following ratios for the company: (a) profit margin ratio (b) gross margin ratio (c) return on total assets (d) return on common stockholders' equity (e) book value per common share (f) basic earnings per share (g) price earnings ratio (h) dividend yield.

Jones Corp. reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet. The working capital is:

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