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Exam 23: Financial Statement Analysis

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Question 41

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If total merchandise available for sale is 68 percent of net sales and cost of goods sold is 56 percent of net sales, gross profit on sales is:

A) 32 percent of net sales.
B) 68 percent of net sales.
C) 44 percent of net sales.
D) 56 percent of net sales.

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

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Question 42

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The rate of return on total assets measures how effectively management has used the assets of the company.

A) True
B) False

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Question 43

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Financial statements presented side-by-side for two or more periods are called-----------statements.

A high rate of return on sales is an indication of managerial efficiency and profitability.

In vertical analysis of the balance sheet, each item is expressed as a percentage of:

A company reported net income of $120,000. It paid a cash dividend of $22,000 to preferred stockholders and a cash dividend to common shareholders of $44,000. If the company has 25,000 shares of common stock outstanding, earnings per share is----------- .

Aston Corporation has a .7 to 1 ratio of stockholders' equity to total liabilities. If stockholders' equity is $420,000, then its total liabilities are $180,000.

Use the following information for the questions Shaw Enterprises Comparative Balance Sheet December 31, 2020 and 2019 -Using the information shown, prepare a vertical analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place. (Leave all percentages unadjusted.)

Selected ratios for Julienne Foods, Inc. and Brut Champagnes, Inc. are given along with industry averages What do these ratios tell you about the companies regarding whether or not to invest in either of them and what additional information might be helpful in that decision?

Sybaritic Corporation Income Statement For the Year Ended September 30, 2020 & 2019 Sybaritic Corporation Balance Sheet September 30, 2020 -Using the information given, analyze the profitability ratios of Sybaritic Corporation for 2020.

Ratios are meaningful only when used to compare performance with rates of prior years and with the industry averages.

Using the comparative balance sheet given below, prepare a horizontal analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place.

You are a loan officer with Scotia Bank. Select at least two of the ratios listed as most useful to you for a decision regarding providing loan proceeds to DC, Inc. and AR, Inc. companies? What additional ratios would you request? Why? Ratios: Working Capital Current Ratio Acid Test Ratio Inventory Turnover Accounts Receivable Turnover

Fielding Corporation has managed to reduce its inventories to half of its prior year total by implementing just-in-time inventory concepts. The significant reduction has led to a higher inventory turnover. Fielding is worried about stock outs and is considering reinvesting in inventory. Fielding should look to industry averages before making a commitment to spend more on restocking their inventory.

If the gross profit on sales is 20 percent of net sales, then cost of goods sold would be----------percent of net sales.

The following financial information was taken from a firm's accounting records for 2019. Use this information to determine the items below. $\begin{array}{lrr} & \text { Jan. } 1 & \text { Dec. 31 } \\\text { Accounts Receivable } & \$ 272,000 & \$ 293,000 \\\text { Merchandise Inventory } & 304,000 & 319,000 \\\text { Net Credit Sales } & & 2,300,000 \\\text { Cost of Goods Sold } & & 1,200,000\end{array}$ (1.) Inventory turnover (2.) Accounts receivable turnover (3.)Average collection period of accounts receivable

A firm reported total liabilities of $50,000 and total stockholders' equity of $150,000. The amount of total liabilities is---------- percent of total assets.

A high ratio of stockholders' equity to total liabilities indicates a greater risk for creditors.

Use the following information for the questions. -Using the information given, discuss Lee Corporation's standing when compared to the industry averages.

A company has total assets of $120,000, current assets of $63,000, total liabilities of $50,000, and current liabilities of $36,000. What amount of working capital is available to meet its obligations?