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Exam 17: Financial Statement Analysis

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Question 71

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A decrease in the ratio of liabilities stockholders' equity indicates an improvement in the margin of safety for creditors.

A) True
B) False

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Question 72

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Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

A) ratio of fixed assets to long-term liabilities
B) ratio of net sales to assets
C) number of days' sales in receivables
D) rate earned on stockholders' equity

E) All of the above
F) A) and B)

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Question 73

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If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

Comparing dividends per share to earnings per share indicates the extent to which the corporation is retaining its earnings for use in operations.

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

Based on the following data for the current year, what is the number of days' sales in accounts receivable?

In a common-sized income statement, each item is expressed as a percentage of net income.

One reason that a common-size statement is a useful tool in financial analysis is that it enables the user to

In horizontal analysis, the current year is the base year.

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.

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 rate earned on common stockholders' equity for this company? Round your answer to one decimal point.

All of the following are typically included in the Management's Discussion and Analysis in annual reports except:

The following data are taken from the financial statements:

When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item before income from continuing operations on the income statement.

Current position analysis indicates a company's ability to liquidate current liabilities.

A company reports the following: Determine the (a) rate earned on stockholders' equity, and (b) rate earned on common stockholders' equity. Round your answer to one decimal place.

Assume the following sales data for a company: What is the percentage increase in sales from 2014 to 2015?

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

Which of the following measures a company's ability to pay its current liabilities?

When a corporation discontinues a segment of its operations at a loss, the loss should be reported as a separate item after income from continuing operations on the income statement.