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Exam 28: Financial Analysis of Performance

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Question 21

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Use the following information to calculate the ratios requested below.Round answers to two decimal places.Show your work. $\begin{array}{lr}\text { Average inventory } &\$ 4,500 \\\text { Average total assets } & 50,000 \\\text { Cost of goods sold } & 15,750 \\\text { Income taxes expense } & 2,700 \\\text { Interest expense } & 1,500 \\\text { Net income } & 3,200 \\\text { Net sales } & 30,000 \\\text { Market price, December 31, on 2,000 shares } & \$ 48 / \text { share }\end{array}$ $\begin{array} { | l | l | l | l| } \hline \text { Return an assets } &\quad & \text { Inventary turnover } &\quad \\\hline \text { Price/earning } ( \mathrm { P } / \mathrm { E } ) \text { ratio } & & \text { Interest coverage ratio } & \\\hline\end{array}$

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Question 22

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The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. Jasmin Corporation Partial Balance Sheet December $31,20 \mathrm{xx}$ $\begin{array}{lr}\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 60,000 \\\text { Long-term liabilities } & 90,000 \\\text { Stockholders' equity } & 150,000\\\text { Total liabilities and stockholders' equity }&\$300,000\end{array}$ Jasmin Corporation Income Statement For the Year Ended December 31, 20xx $\begin{array}{lr}\text { Net sales } & \$ 80,000 \\\text { Cost of goods sold } & 45,000\\\text { Gross margin } & \$ 35,000 \\\text { Operating expenses } & 15,000\\\text { Income before income taxes } & \$ 20,000 \\\text { Income taxes expense } & 5,000\\\text { Net income }&\$15,000\end{array}$ Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $0.90 per share during 20xx. What is the return on assets for this corporation? Round your answer to one decimal place.

A) 5.0 percent
B) 10.0 percent
C) 11.7 percent
D) 26.7 percent

E) All of the above
F) C) and D)

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Question 23

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Profitability is the ability to pay bills when due and to meet unexpected needs for cash.

What is vertical analysis,and why is it useful in performing financial performance measurement?

It is possible for horizontal analysis to indicate a decrease in revenues from one year to another and an increase in net income.

Following are the financial statements for Starman Corporation for the year ended December 31,20xx.Assume that all balance sheet amounts represent both average and ending figures. Starman Corporation Balance Sheet December $31,20 x x$ $\begin{array}{lrr}\text { Assets }\\\text { Cash } & \$ 20,000 \\\text { Marketable securities } & 30,000 \\\text { Accounts receivable } & 50,000 \\\text { Inventory } & 100,000 \\\text { Long-term receivables } & 35,000 \\\text { Property, plant, and equipment } & 65,000\\\text { Total assets }&\$300,000\\\\\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 100,000 \\\text { Long-term liabilities } & 60,000 \\\text { Stockholders' equity } & 140,000\\\text { Total liabilities and stockholders' equity }&\$300,000\end{array}$ $\begin{array}{c}\text {Starman Corporation}\\\text { Income Statement }\\\text {For the Year Ended December 31,20 \times\times }\\\\\begin{array}{lr}\text { Net sales } & \$ 400,000 \\\text { Cost of goods sold } & 240,000 \\ \text { Gross margin } & \$ 160,000 \\\text { Operating expenses } & 40,000 \\\text { Income before income taxes } & \$ 120,000 \\\text { Income taxes expense } & 30,000 \\\text { Net income } & \$ 90,000\end{array}\end{array}$ What is the return on assets for this corporation? Round your answer to one decimal place.

The existence of diversified companies makes which of the following very difficult?

Prepare a horizontal analysis by computing the amounts and percentage changes for the following balance sheet items; place your answers in the blanks provided.

In a common-size financial statement,a designation of 25 percent could not be given to

In conducting horizontal analysis,it is important to focus attention on the changes in

A company with $50,000 in current assets,$25,000 in quick assets,and $30,000 in current liabilities makes a payment of a $1,500 current debt.As a result of this transaction,the current ratio and quick ratio will

Investors,creditors,and customers are considered external users of financial statements.

Declining profitability and liquidity ratios are indications that a company may not survive.

Which of the following describes the interest coverage ratio?

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. Jasmin Carparation Partial Ealance Sheet December $31,20 x$ $\begin{array}{lr}\text { Liabilities and Stockholders' Equity }\\\text { Current liabilities } & \$ 60,000 \\\text { Long-term liabilities } & 90,000 \\\text { Stockholders' equity } & 150,000\\\text { Total liabilities and stockholders' equity }&\$300,000\end{array}$ Jasmin Corporation Income St-atement Far the Year Ended December 31, 20x $\begin{array}{lr}\text { Net sales } & \$ 80,000 \\\text { Cost of goods sold } & 45,000\\\text { Gross margin } & \$ 35,000 \\\text { Operating expenses } & 15,000\\\text { Income before income taxes } &\$20,000\\\text { Income taxes expense }&5,000\\\text { Net income }&\$15,000\end{array}$ Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $1.25 per share during 20xx. What is the dividends yield of this corporation? Round your answer to two decimal places.

Determining the percentage change in an item from one year to the next is a type of horizontal analysis.

The most complete financial newspaper in the United States is the Financial Times.

The comparison of financial measures or ratios of the same company over a period of times is superior to the use of rule-of-thumb measures.

Most companies issue interim financial statements to the public on a monthly basis.

Days' payable measures the relative size of accounts payable.