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Exam 13: Measuring and Evaluating Financial Performance

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Question 61

True/False

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If earnings per share (EPS)increases,it must mean that the company's net income has increased.

A) True
B) False

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Question 62

Multiple Choice

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The comparative financial statements of Seward,Inc.include the following data: Which of the following would be shown on Seward's horizontal analysis when calculating percentage changes from the prior year to the current year?

A) An increase in sales revenue of 23%
B) An increase in gross profit of 41.5%
C) An increase in interest expense of 100%
D) An increase in net income of 57%

E) A) and B)
F) B) and C)

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Question 63

Multiple Choice

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In a common size balance sheet,each item on the balance sheet is expressed as a percentage of:

The following information is taken from the financial statements of Clybourn Company for the current year: On a common size balance sheet what is the percentage that would be shown next to the dollar amount of current assets?

A current ratio of less than one is not so much of a concern when the company has a:

Liquidity measures the ability of a company to meet its long-term financial obligations.

A condensed balance sheet for Morningstar,Inc.is presented below: Morningstar,Inc. Balance Sheet December 31(amounts in millions) Current Assets Current Liabilities Cash & Cash Equivalents $5,000 Accounts Payable $ 310 Accounts Receivable 510 Accrued Liabilities 1,950 Inventories 450 Total Current Liabilities 2,260 Total Current Assets 5,960 Long-Term Liabilities 900 Property & Equipment,Net 2,400 Total Liabilities 3,160 Long-Term Investments 2,200 Total Stockholders' Equity 7,400 Total Assets $10,560 Total Liabilities & Stockholders' Equity $10,560 Required: Part a.Prepare a vertical analysis of the balance sheet above.Round to the nearest whole percent. Part b.Interpret your analysis.Identify significant items.Comment on key relationships.

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

The financial information below presents selected information from the financial statements of Pelican Company.Sales revenue during the current year was $13,700,300 and cost of goods sold was $8,905,195.All of Pelican's sales are made on account and are due within 30 days. Required: Part a.Current ratios as of the end of the current and prior year. Part b.Calculate the receivables turnover ratio for the current year. Part c.Calculate the days to collect for the current year. Part d.Calculate the inventory turnover ratio for the current year. Part d.Calculate the days to sell for the current year. Part e.Evaluate the company's liquidity position at the end of the current year.Cite any additional information not given in the problem that would be helpful in evaluating the company's liquidity. Round all ratios to two decimal places.

A debt-to-assets ratio of 0.50 indicates that the company has:

Which of the following is calculated by dividing net income by revenues?

In a common size income statement,each item on the income statement is expressed as a percentage of:

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n) :

Company X has net sales revenue of $1,250,000,cost of goods sold of $760,000,and all other expenses of $290,000.The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000.The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000. Required: Compute the return on equity (ROE)ratio.

Which of the following would improve a current ratio that is now 1.2?

Which type of analysis could reveal that a company is relying heavily on debt financing?

The following information is taken from the financial statements of Burton Industries: The company's times interest earned ratio is:

Which of the following statements about trend analysis is correct?

A decrease in receivables turnover ratio is indicative of:

Vertical analysis is the comparison of a company's financial information over time.