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Exam 13: Analysis of Financial Statements

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Question 51

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Net income divided by average total assets is:

A) Profit margin.
B) Total asset turnover.
C) Return on total assets.
D) Days' income in assets.
E) Current ratio.

F) A) and B)
G) B) and C)

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Question 52

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A company paid cash dividends on its preferred stock of $40,000 in the current year when its net income was $120,000 and its average common stockholders' equity was $640,000.What is the company's return on common stockholders' equity?

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($120,000 ...

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Question 53

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Martinez Corporation reported net sales of $765,000,net income of $142,000,and total assets of $7,634,409.The profit margin is:

Refer to the following selected financial information from Gomez Electronics. -Compute the company's return on total assets for Year 2.

An example of an intracompany comparison is comparing Apple's profit margin to the industry's profit margin.

Market prospects are the ability to generate positive market expectations.

The measurement of key relationships between financial statement items is known as ________.

Working capital is computed as current liabilities minus current assets.

Guidelines (rules-of-thumb) are general standards of comparison developed from:

Jones Corp.reported current assets of $193,000,current liabilities of $137,000,and total liabilities of $275,714 on its most recent balance sheet.The current ratio is:

Industry standards for financial statement analysis:

Describe the purpose of vertical financial statement analysis and how it is applied.

Profitability is the ability to generate positive market expectations.

The evaluation of company performance and financial condition focuses solely on past performance.

Use the following information from the current year financial statements of a company to calculate the ratios below: (a)Current ratio. (b)Accounts receivable turnover.(Assume the prior year's accounts receivable balance was $100,000.) (c)Days' sales uncollected. (d)Inventory turnover.(Assume the prior year's inventory was $50,200.) (e)Times interest earned ratio. (f)Return on common stockholders' equity.(Assume the prior year's common stock balance was $480,000 and the retained earnings balance was $128,000.) (g)Earnings per share (assuming the corporation only has common stock outstanding). (h)Price earnings ratio.(Assume the company's stock is selling for $26 per share.) (i)Divided yield ratio.(Assume that the company paid $1.25 per share in cash dividends.)

The following selected financial information for a company was reported for the current year end.Calculate the following company ratios: (a)Accounts receivable turnover. (b)Inventory turnover. (c)Days' sales uncollected

The return on total assets ratio is a profitability measure.

A company's calendar-year financial data are shown below.The company had total assets of $339,000 and total equity of $144,400 for the prior year.No additional shares of common stock were issued during the year.The December 31 market price per share is $49.50.Cash dividends of $19,500 were paid during the year.Calculate the following ratios for the company: (a)profit margin ratio (b)gross margin ratio (c)return on total assets (d)return on common stockholders' equity (e)book value per common share (f)basic earnings per share (g)price earnings ratio (h)dividend yield.

Internal users of financial information:

A corporation reports the following year-end balance sheet data. -The company's equity ratio equals: