Accounting Chapter 15 – Financial Statement Analysis – Flashcards

In a common size income statement, which of the following is given a percentage of 100 percent? a. total liabilities b. property, plant and equipment c. sales d. net income

Assume the following sales data for a company: Year 2 $684,000 Year 1 600,000 What is the percentage increase in sales from Year 1 to Year 2 (to the nearest percent)? a. 114% b. 88% c. 14% d. 12%

In horizontal analysis, each item is expressed as a percentage of the a. base year figure. b. net income figure. c. total assets. d. latest year.

When analyzing a company, the following factors should be considered a. trends in the industry. b. All of these choices are correct. c. general economic conditions. d. analytcial measures.

The formula used to calculate inventory turnover is a. total sales / average inventory. b. cost of goods sold / inventory at year-end. c. sales/ inventory at year-end. d. cost of goods sold / average inventory.

Based on the following data, what is the quick ratio, rounded to one decimal? Accounts payable $20,000 Accounts receivable 45,000 Accrued liabilities 7,000 Cash 30,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 10,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000 a. 5.0 b. 3.0 c. 4.9 d. 3.1

Based on the following data, what is the amount of quick assets? Accounts payable $30,000 Accounts receivable 45,000 Accrued liabilities 7,000 Cash 20,000 Intangible assets 40,000 Inventory 72,000 Long-term investments 100,000 Long-term liabilities 75,000 Marketable securities 36,000 Notes payable (short-term) 20,000 Property, plant, and equipment 625,000 Prepaid expenses 2,000

The numerator in the calculation of the ratio of liabilities to stockholders' equity is a. total liabilities minus total stockholders' equity. b. total assets. c. total liabilities. d. total stockholders' equity.

A company that is leveraged is one that a. contains debt financing. b. has a high earnings per share. c. contains no debt financing. d. contains equity financing.

The balance sheets at the end of each of the first two years of operations indicate the following: Year 2 Year 1 Total current assets $630,000 $560,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Preferred 9% stock, $100 par 100,000 100,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par—common stock 60,000 60,000 Retained earnings 330,000 210,000 If net income is $125,000 and interest expense is $30,000 for Year 2, what is the rate earned on total assets for Year 2? (Round percent to one decimal point.) 93.2% None of these choices are correct. 8.7% 10.7%

The balance sheets at the end of each of the first two years of operations indicate the following: Year 2 Year 1 Total current assets $530,000 $460,000 Total investments 60,000 40,000 Total property, plant, and equipment 900,000 700,000 Total current liabilities 150,000 80,000 Total long-term liabilities 350,000 250,000 Common stock, $10 par 600,000 600,000 Paid-in capital in excess of par—common stock 60,000 60,000 Retained earnings 330,000 210,000 If net income is $158,100 and interest expense is $30,000 for Year 2, what is the rate earned on stockholders' equity for Year 2? (Round percentage to one decimal point.) a. 20.2% b. 17.0% c. 16.0% d. 24.0%

The formula to calculate the ratio of sales to assets is a. sales / average total assets. b. average total assets / sales. c. (total assets at the beginning of the year plus total assets at the end of the year) / sales. d. total assets at the beginning of the year /sales

Which two reports on internal control are sometimes combined into a single report on internal control? a. The income statement and the balance sheet b. The unqualified audit opinion report and the qualified audit opinion report c. The MD&A and the Report of Independent Registered Public Accounting Firm d. One report by management and one report by a public accounting firm regarding the adequacy of internal controls

An annual report includes all of the following except a. notes to the financial statements. b. an auditor's report. c. resumes of all key executives. d. management discussion and analysis section.

Corporate annual reports typically do not contain which of the following? a. management discussion and analysis b. auditor's report c. accompanying footnotes d. next year's budget

f a company abandons a segment of its operation, the loss would be reported on the a. income statement before income from continuing operations. b. balance sheet in the current assets section. c. income statement immediately after income from continuing operations. d. income statement immediately after cost of goods sold.