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Exam 13: Analyzing and Interpreting Financial Statements

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Question 1

True/False

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Evaluation of company performance does not include analysis of (1) past and current performance, (2) current financial position, and (3) future performance and risk.

A) True
B) False

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Question 2

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The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.

A) True
B) False

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Question 3

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Net income divided by average total assets is:

Standards for comparison when interpreting financial statement analysis include competitor and industry performance data.

An advantage of common-size statements is that they reflect the dollar magnitude (size) of the different companies under analysis.

The current ratio and acid-test ratio are used to reflect the ____________ of a business.

A high level of expected risk suggests a low price-earnings (PE) ratio.

To compute trend percentages the analyst should:

Midsomer Corp. reported current assets of $390,900 and current liabilities of $337,000 on its most recent balance sheet. The current assets consisted of $52,000 Cash; $63,000 Accounts Receivable; $87,000 Short-term Investments; $9,900 Prepaid Expenses and $179,000 of Inventory. The company's quick assets equal:

Annual cash dividends per share divided by market price per share is the:

Financial reporting includes not only general purpose financial statements, but also information from SEC filings, press releases, shareholders' meetings, forecasts, management letters, auditor's reports, and Webcasts.

The building blocks of financial statement analysis do not include:

Powers Company reported Net sales of $1,200,000 and Accounts Receivable, net of $78,500. The day's sales uncollected (rounded to whole days) is:

What are the four standards for comparisons in financial analysis? Give an example of each.

Flaherty Corporation used data for 3 years to perform a trend analysis of its operating expenses, which were $54,305 in Year 1; $63,421 in Year 2 and $70,340 in Year 3. Using Year 1 as the base year, the operating expense trend percent (rounded to the nearest whole percent) for Year 3 is:

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

The four building blocks of financial analysis are (1) _____________, (2) ____________, (3) ____________ and (4) _________________.

The following information is available for the Marr Corporation: Calculate the company's inventory turnover and its days' sales in inventory.

Profitability is the ability to generate positive market expectations.

Current assets divided by current liabilities is the: