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Exam 13: Analyzing and Interpreting Financial Statements

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Question 1

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Financial statement analysis is the application of analytical tools to general-purpose financial statements and related data for making business decisions.

A) True
B) False

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Question 2

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Trend analysis is also called:

A) Financial analysis.
B) Ratio analysis.
C) Index number trend analysis.
D) Industry analysis.
E) Output analysis.

F) None of the above
G) A) and D)

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Question 3

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For internal users,one purpose of financial statement analysis is to provide information helpful in improving the company's efficiency and effectiveness in providing products and services.

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

_______________ are reports where financial amounts are placed side-by-side in columns on a single statement for analytical purposes.

Standards for comparison are necessary when making judgments about a company's financial performance.

Current assets divided by current liabilities is equal to the:

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in dollar amounts and percents,are referred to as:

A company has sales of $5,417,000,a gross profit ratio of 35%,ending merchandise inventory of $201,425,and total current assets of $1,539,600.What is the days sales' in inventory ratio for the year?

A company had a profit margin of 5%.If net income equaled $83,000 and average total assets equaled $45,000,how much were net sales?

A company's balance sheet and income statement accounts follow: -What is the company's gross margin ratio for 2013?

The debt ratio,the equity ratio,pledged assets to secured liabilities,and times interest earned are all ___________________ ratios.

Express the following income statement information in common-size percents and in trend percents using 2013 as the base year.

A company reported net income of $78,000 and had 15,000 common shares outstanding throughout the current year.At year-end,the price per share of the company's stock was $49.40.What is the company's year-end price-earnings ratio?

Working capital is computed as current liabilities minus current assets.

The return on total assets ratio is a profitability measure.

The use of horizontal and vertical analysis eliminates many differences between GAAP and IFRS,but the user must exercise some caution when drawing conclusions from these reports.

Vertical analysis is the comparison of a company's financial condition and performance through time.

A company's sales in 2012 were $280,000 and its sales in 2013 were $341,600.Using 2012 as the base year,what is the sales trend percent for 2013?

Net income divided by net sales is equal to the: