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Exam 12: Financial Statement Analysis

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Question 41

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Which of the following is an advantage of a company using equity rather than debt to finance a project?

A) Dividends do not need to be paid.
B) Interest is tax deductible whereas dividends paid are not.
C) Dividends always require less cash than does paying interest on debt.
D) All of these ans choices are advantages of using equity rather than debt to finance a project.

E) None of the above
F) A) and C)

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Question 42

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Another form of horizontal analysis is called trend analysis.

A) True
B) False

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Question 43

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The quality of assets is assessed through

The percentage change,as shown in horizontal analysis,is calculated as: current year account balance - previous year account balance ÷current year account balance

The 2013 and 2014 partial balance sheets for Ottoman Industries are shown below. Calculate Ottoman's working capital for 2014.

Foreman Outfitters,a retail store of camping supplies,has sales of $300,000 and cost of goods sold of $210,000.Beginning inventory was $20,000 and ending inventory was $12,000.What is the company's average days to sell inventory?

The following financial statement items are shown for J&T Manufacturing. Calculate the common-size percentage for Gross Margin.

A helpful approach to examine changes in the relative size of account balances within a single statement is referred to as horizontal analysis.

Three measures of liquidity are working capital,current ratio,and acid-test ratio.What do each of these measure,and how are they each calculated?

Rather than looking only at the balances reported on the financial statements,it is helpful to look at the changes in the account balances over time.This is called

The price/earnings ratio indicates

On a common-size balance sheet,notes receivable is shown as a percentage of

The formula for the return on common stockholders' equity is

The following financial statement items are shown for J&T Manufacturing. Calculate the common-size percentage for inventory.

Inventory turnover measures how many times,on average,a company's inventory is sold during the year.

On a common-size balance sheet,common stock is shown as a percentage of

Barber Industries reported net income of $32,000,earnings per share of $1.20 and paid dividends of $0.30 per share.What is the dividend payout ratio?

Common-size statements are especially helpful in comparing companies of different size.

Which of the following is the formula for calculating the percentage in trend analysis?

The 2013 and 2014 balance sheets for Ottoman Manufacturing Company appear below along with selected financial information: a.Calculate the acid-test ratio for 2014. b.Calculate the working capital for 2014. c.Calculate earnings per share for 2014.