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Exam 15: Financial Statement Analysis

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Question 91

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$\begin{array}{lr}\text { Accounts payable } & \$ 30,000 \\\text { Accounts receivable } & 35,000 \\\text { Accrued liabilities } & 7,000 \\\text { Cash } & 25,000 \\\text { Intangible assets } & 40,000 \\\text { Inventory } & 72,000 \\\text { Long-term investments } & 100,000 \\\text { Marketable securities } & 75,000 \\\text { Notes payable short-term } & 36,000 \\\text { Property, plant, and equipment } & 20,000 \\\text { Prepaid expenses } & 400,000 \\& 2,000\end{array}$ -Based on the above data,what is the amount of working capital?

A) $213,000
B) $113,000
C) $153,000
D) $39,000

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

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Question 92

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

A) True
B) False

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Question 93

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Abigail Company reports the following: $\begin{array}{|l|r|}\hline\text { Net income } & \$ 295,000 \\\hline \text { Preferred dividends } & 30,000 \\\hline \text { Average stockholders' equity } & 1,000,000 \\\hline \text { Average common stockholders' equity } & 700,000 \\\hline\end{array}$ Determine the a rate earned on stockholders' equity,and b rate earned on common stockholders' equity.Round your answer to one decimal place.

The percent of fixed assets to total assets is an example of

Ratios and various other analytical measures are not a substitute for sound judgment,nor do they provide definitive guides for action.

Which of the following items appear on the corporate income statement before income from continuing operations?

Leverage implies that a company

On a common-sized income statement,all items are stated as a percent of total assets or equities at year-end.

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

The following information is available for Jase Company: $\begin{array}{llcc} \text { Market price per share of common stock } & \$25.00 \\ \text { Earnings per share on common stock } &\$1.25\end{array}$ Which of the following statements is correct?

Which of the following items should be classified as an extraordinary item on an income statement?

A company reports the following: $\begin{array}{|l|r|}\hline \text { Net income } & \$ 350,000 \\\hline \text { Preferred dividends } & 50,000 \\\hline \text { Average stockholders' equity } & 1,000,000 \\\hline \text { Average common stockholders' equity } & 800,000 \\\hline\end{array}$ Determine the a rate earned on stockholders' equity,and b rate earned on common stockholders' equity . Round to one decimal place.

From the following data for Norton Company for the year ended December 31,prepare a multiple-step income statement.Show earnings per share for the following: income from continuing operations,loss on discontinued operations less applicable income tax,income before extraordinary item,extraordinary item less applicable income tax,and net income.

An extraordinary item can result from

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

The following items are reported on a company's balance sheet: $\begin{array}{lr}\text { Cash } & \$ 230,000 \\\text { Marketable securities } & 50,000 \\\text { Accounts receivable } & 200,000 \\\text { Inventory } & 240,000 \\\text { Accounts payable } & 300,000\end{array}$ Determine the a current ratio,and b quick ratio.Round your answer to one decimal place.

Which of the following is the most useful in analyzing companies of different sizes?

The balance sheets at the end of each of the first two years of operations indicate the following: -If net income is $250,000 and interest expense is $30,000 for Year 2,what are the earnings per share on common stock for Year 2?

A balance sheet shows cash,$75,000; marketable securities,$115,000; receivables,$150,000; and inventories,$222,500.Current liabilities are $225,000.The current ratio is 2.5.