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Exam 17: Financial Statement Analysis

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Question 31

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Those unusual items reported as deductions from income from continuing operations should be listed net of the related income tax.

A) True
B) False

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Question 32

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The following selected data were taken from the financial statements of the Berrol Group for December 31, 2012, 2011, and 2010: The 2012 net income was $242,000 and the 2011 net income was $308,000. No dividends on common stock were declared between 2010 and 2012. Required: (1) Determine the rate earned on total assets, the rate earned on stockholders' equity, and the rate earned on common stockholders' equity for the years 2012 and 2011. Round to one decimal place. (2) What conclusion can be drawn from these data as to the company's profitability?

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Question 33

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The following items are reported on a company's balance sheet: Required: Determine (1) the current ratio and (2) the quick ratio. Round to one decimal place.

When you are interpreting financial ratios, it is useful to compare a company's ratios to some form of standard.

The balance sheets at the end of each of the first two years of operations indicate the following: If net income is $115,000 and interest expense is $30,000 for 2012, what are the earnings per share on common stock for 2012, (round to two decimal places) ?

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the dividend yield for this company? Round your answer to one decimal point.

A 15% change in sales will result in a 15% change in net income.

The tendency of the rate earned on stockholders' equity to vary disproportionately from the rate earned on total assets is sometimes referred to as

Selected data from the Carmen Company at year end are presented below: Instructions Calculate the profitability ratios that can be computed from the above information.Assume the company had no preferred stock or interest expense. Round percentage value to one decimal place and dollar value to zero decimal place. With the information provided, the profitability ratios that can be calculated are as follows:

In computing the ratio of net sales to assets, long-term investments are excluded from average total assets.

What information is generally included in the Management Discussion and Analysis (MD&A) section of a corporate annual report?

An increase in the accounts receivable turnover may be due to an improvement in the collection of receivables or to a change in the granting of credit and/or in collection practices.

Comparable financial statements are designed to compare the financial statements of two or more corporations.

If a firm has a current ratio of 2, the subsequent receipt of a 60-day note receivable on account will cause the ratio to decrease.

What type of analysis is indicated by the following?

A company reports the following: Determine the (a) rate earned on stockholders' equity, and (b) rate earned on common stockholders' equity. Round your answer to one decimal place.

In computing the rate earned on total assets, interest expense is subtracted from net income before dividing by average total assets.

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

An advantage of the current ratio is that it considers the makeup of the current assets.

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.