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Exam 17: Analysis of Financial Statements

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Question 1

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Refer to the following selected financial information from Fennie's, LLC. Compute the company's inventory turnover for Year 2.

A) 4.72.
B) 4.33.
C) 3.17.
D) 5.78.
E) 3.86.

F) B) and C)
G) None of the above

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Question 2

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Selected balances from a company's financial statements are shown below. Calculate the following ratios for 2012: (a) accounts receivable turnover (b) inventory turnover (c) days' sales uncollected (d) days' sales in inventory (d) profit margin. (e) return on total assets.

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Comparative horizontal analysis is used to reveal patterns in data covering successive periods.

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

A company's sales in Year 1 were $280,000, and its sales in Year 2 were $341,600. Using Year 1 as the base year, what is the sales trend percent for Year 2?

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

Match each of the following terms with the appropriate definitions.

______________________ ratios include the price-earnings ratio and dividend yield.

A trend percent, or index number, is calculated by dividing the analysis period amount by the base period amount and multiplying the result by 100.

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

The higher the accounts receivable turnover, the less quickly accounts receivable are collected.

The four building blocks of financial analysis are (1) __________________, (2) ________________________, (3) ____________________ and (4) ___________________.

Refer to the following selected financial information from Fennie's, LLC. Compute the company's working capital for Year 2.

General-purpose financial statements include the (1) staement of comprehensive income (income statement), (2) statement of financial position (balance sheet), (3) statement of changes in equity, (4) statement of cash flows, and (5) notes to these statements.

The greater the times interest earned ratio, the greater the risk a company is exposed to.

Efficiency refers to how productive a company is in using its assets, and is usually measured relative to how much revenue is generated from a certain level of assets.

Intracompany standards for financial statement analysis:

Current assets minus current liabilities is:

Comparative calendar-year financial data for a company are shown below. Calculate the following ratios for the company for 2012: (a) accounts receivable turnover (b) day's sales uncollected (c) inventory turnover (d) days' sales in inventory

External users of accounting information make the strategic and operating decisions of a company.