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Exam 13: Financial Statement Analysis

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Question 81

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Excerpts from Candle Corporation's most recent balance sheet (in thousands of dollars) appear below: Sales on account during the year totaled $1,200 thousand. Cost of goods sold was $800 thousand. Required: Compute the following for Year 2: a. Working capital. b. Current ratio. c. Acid-test ratio. d. Accounts receivable turnover. e. Average collection period. f. Inventory turnover. g. Average sale period.

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a. Working capital = Current assets - Cu...

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Question 82

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If current assets exceed current liabilities, prepaying an expense on the last day of the year will:

A) decrease the current ratio.
B) increase the acid-test ratio.
C) decrease the acid-test ratio.
D) increase the current ratio.

E) A) and B)
F) C) and D)

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Question 83

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The acid-test ratio is usually greater than the current ratio.

Guttery Corporation has provided the following financial data from its balance sheet: Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000. The company's average collection period (age of receivables) for Year 2 is closest to:

Financial statements for Maraby Corporation appear below: Maraby Corporation's working capital (in thousands of dollars) at the end of Year 2 was closest to:

Rawdon Corporation's net operating income in Year 2 was $52,429, net income before taxes was $34,429, and the net income was $24,100. Total common stock was $360,000 at the end of both Year 2 and Year 1. The par value of common stock is $4 per share. The company's total stockholders' equity at the end of Year 2 amounted to $976,000 and at the end of Year 1 to $960,000. The company's earnings per share for Year 2 is closest to:

For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net operating income was $63,714, its net income before taxes was $42,714, and its net income was $29,900. The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000. The company's return on equity for Year 2 is closest to:

Data from Keniston Corporation's most recent balance sheet and income statement appear below: $\begin{array} { | l r | r | } \hline & \text { This Year } & \text { Last Year } \\\hline \text { Accounts receivable } & \$ 128,000 & \$ 114,000 \\\hline \text { Inventory } & \$ 228,000 & \$ 193,000 \\\hline \text { Sales on account } & \$ 813,000 & \\\hline \text { Cost of goods sold } & \$ 597,000 & \\\hline\end{array}$ The average collection period for this year is closest to:

Klein Corporation has provided the following data: $\begin{array} { | l | r | r | } \hline & \text { Year 2 } & \text { Year 1 } \\\hline \text { Total assets } & \$ 1,337,000 & \$ 1,310,000 \\\hline \text { Total liabilities } & \$ 598,000 & \$ 580,000 \\\hline \begin{array} { l } \text { Total stockholders' } \\\text { equity }\end{array} & \$ 739,000 & \$ 730,000 \\\hline\end{array}$ The company's equity multiplier is closest to:

Excerpts from Colter Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,210 and the cost of goods sold was $720. The acid-test ratio at the end of Year 2 is closest to:

Dahn Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at the end of Year 2 was $2.37 per share. The company's average sale period (turnover in days) for Year 2 is closest to:

Walker Corporation has provided the following financial data: The company's net operating income for Year 2 was $63,615 and its interest expense was $15,000. Required: a. What is the company's working capital at the end of Year 2? b. What is the company's current ratio at the end of Year 2? c. What is the company's acid-test (quick) ratio at the end of Year 2? d. What is the company's times interest earned for Year 2? e. What is the company's debt-to-equity ratio at the end of Year 2? f. What is the company's equity multiplier at the end of Year 2?

Turner Co. presently has a current ratio of 0.8. The company has been informed by its bank that it must improve its current ratio to qualify for a line of credit. Which of the following actions would improve the current ratio?

As the accounts receivable turnover ratio decreases, the average collection period increases.

Kearin Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $8,000. The market price of common stock at the end of Year 2 was $2.02 per share. The company's gross margin percentage for Year 2 is closest to:

An increase in the number of shares of common stock outstanding will increase a company's price-earnings ratio if the market price per share remains unchanged.

Data from Lheureux Corporation's most recent balance sheet and the company's income statement appear below: The debt-to-equity ratio at the end of Year 2 is closest to:

Guttery Corporation has provided the following financial data from its balance sheet: Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000. The company's accounts receivable turnover for Year 2 is closest to:

All other things the same, when a customer purchases an item for cash, the accounts receivable turnover ratio increases.

Nickolls Corporation has provided the following financial data: The company's acid-test (quick) ratio is closest to: