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Exam 12: Financial Statement Analysis

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Question 81

Multiple Choice

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Which analysis deals with the percentage of changes in certain items over a period of years?

A) Horizontal analysis
B) Vertical analysis
C) Incremental analysis
D) Trend analysis

E) All of the above
F) None of the above

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Question 82

Multiple Choice

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Which of the following is a solvency ratio?

A) Cash conversion cycle
B) Earnings per share
C) Debt ratio
D) Gross profit percentage

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

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Question 83

Multiple Choice

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A company's business strategy describes:

The return on assets measures the relationship between sales and average total assets.

When does a business pay dividends?

Illusions, Inc. has current assets of $52,000, long-term assets of $262,700, current liabilities of $42,600, and long-term debt of $154,700. Illusions' debt ratio is: (Round your final answer to two decimal places, X.XX%.)

Predictions about a company's future earnings can best be inferred from the Income Statement's:

The 2015 and 2016 balance sheets for Steele Electric showed Cash of $6500 and $8000 respectively, Accounts Receivable of $17,000 and $20,000, respectively, Inventory of $12,500 and $9500, respectively, and Accounts Payable of $4700 and $7700, respectively. Its 2016 Income Statement showed Net Sales of $120,000, Cost of Goods Sold of $59,000, and Net Income of $33,000. The cash conversion cycle for 2016 was: (Assume all Sales are credit sales. Round any intermediary calculations to two decimal places and your final answer to the nearest day.)

TNT Guitar's sales were $13,100 in 2016 and $11,600 in 2015. The percentage change in TNT's sales from 2015 to 2016 was: (Round your final answer to two decimal places, X.XX%.)

Statements that are often used to compare different size businesses are called:

Common-size statements use the same percentages that are computed during a vertical analysis, but no dollar amounts are shown.

The economic environment of a business describes how a business is affected by competitors.

Dolly's Diamonds reported Net Sales of $254,000, Cost of Goods Sold of $107,500, Operating Expenses of $60,400, and Income Tax Expense of $21,600. Dolly's gross profit margin percentage was: (Round your final answer to two decimal places, X.XX%.)

The sales of Sassycat, Inc. for the years 2014, 2015, and 2016 are $36,000, $59,000 and $76,000, respectively. If 2014 is the base year, the trend percentage for 2015 is: (Round your final answer to two decimal places, X.XX%.)

Betta, Inc. reported $23,800 in A/R in 2016 and $25,200 in A/R in 2015. The percentage change in A/R from 2015 to 2016 was: (Round your final answer to two decimal places, X.XX%.)

Inventory turnover measures the relationship between:

Financial analysis focuses on evaluating a company's past performance to predict its current performance.

Financial statement analysis indicates only that a problem may exist and offers clues as to what the problem might be.

A measure of how well earnings support dividend payments is:

Net income was $48,000 in 2015 and $60,000 in 2016. The percentage increase or decrease in net income from 2015 to 2016 was: (Round your final answer to two decimal places, X.XX%.)