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Exam 18: Financial Statement Analysis

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Question 51

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If the average collection period is 60 days what is the accounts receivable turnover?

A) 6.0 times
B) 6.1 times
C) 12.2 times
D) None of these

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Question 52

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Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

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Question 53

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Stockholders are most interested in evaluating

Horizontal analysis evaluates a series of financial statement data over a period of time

North Company reports the following amounts for 2017: $\begin{array} { l r } \text { Net income } & 160,000 \\\text { Average stockholders' equity } & 2,000,000 \\\text { Preferred dividends } & 45,000 \\\text { Parvalue preferred stock } & 250,000\end{array}$ The 2017 rate of return on common stockholders' equity is:

Using vertical analysis of the income statement a company's net income as a percentage of net sales is 10%; therefore the cost of goods sold as a percentage of sales must be 90%.

A percentage change can be computed only if the base amount is zero or positive.

Which one of the following is primarily interested in the liquidity of a company?

In common size analysis

Selected data for Irma's Store appear below. $\begin{array} { l r r } & { 2017 } & { 2016 } \\\text { Net sales } & \$ 800,000 & \$ 520,000 \\\text { Cost of goods sold } & 600,000 & 345,000 \\\text { Inventory at end of year } & 65,000 & 85,000 \\\text { Accounts receivable at end of year } & 140,000 & 110,000\end{array}$ Instructions Compute the following for 2017: (a) Gross profit rate. (b) Inventory turnover. (c) Accounts receivable turnover.

Vertical analysis is a technique which expresses each item within a financial statement

In vertical analysis the base amount in an income statement is usually net sales.

Horizontal analysis is also called

The following information is available for Oakland Company: $\begin{array}{lrr}&2017&2016\\\text { Accounts receivable } & \$ 360,000 & \$ 400,000 \\\text { Inventory } & 340,000 & 400,000 \\\text { Net credit sales } & 2,470,000 & 1,400,000 \\\text { Cost of goods sold } & 1,850,000 & 1,060,000 \\\text { Net income } & 300,000 & 170,000\end{array}$ The inventory turnover ratio for 2017 is

Measures of a company's liquidity are concerned with the frequency and amounts of dividend payments.

Blitzen Corporation had net income of $200000 and paid dividends to common stockholders of $50000 in 2017. The weighted average number of shares outstanding in 2017 was 40000 shares. Blitzen Corporation's common stock is selling for $35 per share on the New York Stock Exchange. Blitzen Corporation's price-earnings ratio is

An aircraft company would most likely have

Inventory turnover is calculated by dividing

Ratios that measure the short-term ability of the company to pay its maturing obligations are

Booker Corporation had the following comparative current assets and current liabilities: $\begin{array} { l r r } & \text { Dec. } 31,2017 & \text { Dec. 31, 2016 }\\\text { Current assets } \\\text { Cash } & \$ 60,000 & \$ 30,000 \\\text { Short-term investments } & 40,000 & 10,000 \\\text { Accounts receivable } &55,000 & 95,000 \\\text { Inventory } &110,000 & \$ 90,000 \\\text { Prepaid expenses } & 35,000 & \$ 20,000 \\\quad \text { Total current assets } &\$ 300,000 & \$ 245,000 \\\text { Current liabilities } & \\\text { Accounts payable } & \$ 140,000 & \$ 110,000 \\\text { Salaries payable } & 40,000 & 30,000 \\\text { Income tax payable } & 20,000 & 15,000 \\\quad \text { Total current liabilities } &\$200,000&\$155,000 \\\end{array}$ During 2017 credit sales and cost of goods sold were $750000 and $400000 respectively. Instructions Compute the following liquidity measures for 2017: 1. Current ratio. 2. Working capital. 3. Acid-test ratio. 4. Accounts receivable turnover. 5. Inventory turnover.