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Exam 13: Analyzing Financial Statements

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Question 61

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The current ratio is a less stringent test of liquidity than is the quick ratio.

A) True
B) False

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Question 62

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Custer Corporation reported the following information related to its common share (par $10) outstanding and profit:

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(a) $40/[($35,000)/($40,000/$1...

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Question 63

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The cumulative effect of accounting changes are disclosed in the statement of shareholders' equity (or retained earnings).

The inventory turnover ratio measures the number of times, on average, the inventory was sold during the period.

At the end of 20B, Storage Company reported 15,000 outstanding common shares. Total liabilities were $440,000 and total assets were $860,000. The company had no preferred shares. What was the book value per share of common share?

Match the ratio computation with the ratio. Ratio Computation A. Profit ÷ Net sales revenue B. Net credit sales ÷ Average net receivables C. Return on equity - Return on assets D. Sales revenue ÷ Total operating expenses E. Total liabilities ÷ Shareholders' Equity F. Market price per share ÷ EPS G. Profit ÷ Average shareholders' equity H. Creditors' equity ÷ Total equities I. Income tax expense ÷ Pretax income J. Quick assets ÷ Current liabilities K. Sales revenue ÷ Total assets L. Dividends per share ÷ Market price per share M. Shareholders' equity ÷ Total equities N. Cost of goods sold ÷ Average inventory O. (Income + After-tax interest expense) ÷ Total assets P. Current assets ÷ Current liabilities Q. Profit ÷ Average number of shares of common share outstanding R. (Cash + Cash equivalents) ÷ Current liabilities S. Cash Flows from Operating Activities ÷ Profit T. (Profit + Interest + Income Tax Expense) ÷ Interest Expense U. Net Sales Revenue ÷ Net Fixed Assets V. Cash Flows from Operating Activities (before interest and tax expense) ÷ Interest Paid W. Not given above. Ratio Designation ____ 1. Return on equity ____ 2. Return on assets ____ 3. Financial leverage ____ 4. EPS ____ 5. Profit margin 6. Current ratio 7. Quick ratio 8. Receivables turnover ratio ____ 9. Inventory turnover ratio ___ 10. Debt/equity ratio ___ 11. Owners' equity to total equities 12. Creditors' equity to total equities ___ 13. Price/earnings ratio ___ 14. Dividend yield ratio ___ 15. Book value per common share ___ 16. Cash coverage ratio _ 17. Cash ratio _ 18. Quality of earnings 19. Times interest earned ___ 20. Fixed asset turnover ratio

The inventory turnover ratio is calculated by dividing

A company has a receivables turnover ratio of 12. The average gross accounts receivable during the period is $360,000. What is the amount of net credit sales for the period?

Calculate P Co's dividend yield for 2012 and 2011 respectively.

Lyceum Co. reported profit of $8.3 million, interest expense of $.5 million and they are in a 30% tax rate bracket. Their average total assets are $65.8 million and average shareholders' equity is $48.6 million. What is Lyceum's financial leverage advantage or disadvantage?

Liquidity refers to the ability of a company to meet its currently maturing obligations, and solvency refers to the ability of a company to meet its long-term obligations on a continuing basis.

If an increase in ROA is the result of borrowing at high interest rates, investors could well interpret negative leverage as reflecting good news.

Smith Company gathered the following information for 20B:

Short-term creditors are usually most interested in assessing

When are ratios most useful for analysis?

Teel Company's working capital was $40,000 and total current liabilities were 1/4 of that amount. What was the current (working capital) ratio?

The only way an investor will get a return on shares while they own the shares is for the corporation to distribute a dividend.

In 2012, C Co's total liabilities were $10,742 million and shareholders' equity was $8,403 million. In 2012, P Co's total liabilities were $16,259 million and their shareholders' equity was $6,401 million. Which of the following statements is false?

A general rule to use in assessing the average collection period is that it

Calculate P Co's dividend payout for 2012 and 2011 respectively.