Question 1

Hull Company reports the following data:  Based on the above data, what can be said about the Hull Company?

Accepted Answer

The answer of Hull Company reports the following data: ...

Question 2

On a common-size income statement, income taxes expense is expressed as a percentage of:

Accepted Answer

Income taxes expense is a percentage of net sales on a common-size income statement.

Question 3

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

Accepted Answer

A common-size statement expresses each line item as a percentage of a key item, typically either total assets or net sales. This allows for easier comparison between companies or years, as it highlights differences in proportion rather than just raw numbers. Benchmarking involves comparing a company's performance to that of its competitors, while horizontal analysis looks at changes in financial performance over time. Financial ratio analysis involves calculating various ratios using data from the financial statements.

Question 4

You are the CEO of Company A and you are using an industry leader (Leader Company)for benchmarking. Company A is much smaller than Company B in terms of total assets and total sales revenue. You should compare the:

Accepted Answer

Comparing ratios like the net income to net sales ratio provides a relative measure of performance that accounts for size differences between companies, making it a more meaningful comparison.

Question 5

Given the following data:  In vertical analysis, net income would be expressed as: (Round your final answer to the nearest whole percent, X%.)

Accepted Answer

The answer of Given the following data:  In vertical...

Question 6

Szidon Company reports the following data:  Using benchmarking, what can be said about Szidon Company?

Accepted Answer

The answer of Szidon Company reports the following data: ...

Question 7

On a common-size balance sheet, each line item is expressed as a percentage of:

Accepted Answer

On a common-size balance sheet, each line item is expressed as a percentage of total assets. This allows for easier comparison between companies with different asset sizes.

Question 8

Common-size financial statements report only dollar amounts.

Accepted Answer

Common-size financial statements report dollar amounts as a percentage of a base amount, such as total assets or total revenue.

Question 9

A vertical analysis of a balance sheet shows that current assets have increased from 42% to 56%. This means that:

Accepted Answer

Vertical analysis compares each line item on a financial statement to a base value, in this case total assets. The increase from 42% to 56% means that current assets have grown as a percentage of total assets. There is no information provided to determine if the dollar amount of total assets has increased, decreased, or if the dollar amount of long-term assets has increased.

Question 10

Prepare a vertical analysis for Katrina Corporation using the information shown below. Round percentages to one decimal place.

Accepted Answer

The answer of Prepare a vertical analysis for Katrina Corporation...

Question 11

Wilhelm Company's gross profit percentages for the past 3 years are:  Based on the above data, what can be said about the Wilhelm Company?

Accepted Answer

The answer of Wilhelm Company's gross profit percentages for the...

Question 12

Benchmarking compares a company to some standard set by others.

Accepted Answer

Benchmarking involves comparing a company's performance to a standard set by other companies or industry benchmarks.

Question 13

Which of the following would be most helpful in the comparison of different size companies?

Accepted Answer

Preparation of common-size financial statements involves expressing items as percentages of a common base, which allows for easier comparison between companies of different sizes. Horizontal analysis, comparison of net incomes, and working capital balances are all useful in evaluating individual companies, but they may not be as effective in comparing companies of different sizes.

Question 14

Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.

Accepted Answer

Benchmarking common size variables against a key competitor provides meaningful information regardless of the size of the companies. While comparing companies of similar size may be more useful for certain analyses, it is not necessary for all comparisons.

Question 15

You are using a leading competitor, Company B, for benchmarking your company, Company A. When benchmarking, the gross margin of Company A is expressed as a percentage of:

Accepted Answer

The gross margin of Company A is calculated as a percentage of its own net sales when benchmarking with Company B. It helps to determine the efficiency of Company A's production and pricing strategies compared to its direct competitor, Company B.

Question 16

Reimer Company reports the following data:  When evaluating the results of operations, what can be said about Reimer Company?

Accepted Answer

The answer of Reimer Company reports the following data: ...

Question 17

Given the following data:  In vertical analysis, Accounts Receivable, net would be expressed as: (Round your final answer to the nearest whole percent, X%.)

Accepted Answer

The answer of Given the following data:  In vertical...

Question 18

In 2016, the Zenon Company reported that property, plant and equipment were equal to 13% of total assets. In 2016, current assets were equal to 87% of total assets. In 2017 the company reported that property, plant and equipment were equal to 28% of total assets. In 2017, current assets were equal to 72% of total assets. What conclusion can be reached from this information?

Accepted Answer

In 2017, property, plant and equipment as a proportion of total assets increased (from 13% to 28%). This suggests that the company is investing in the future.

Question 19

Walton Company's return on sales for the most recent year was 5%. The industry leader reports a return on sales of 7%. The comparison of Walton Company's return on sales to the industry leader is an example of:

Accepted Answer

Benchmarking is the process of comparing a company's performance to that of a competitor or industry leader to identify strengths, weaknesses, and areas for improvement. In this case, comparing Walton Company's return on sales to the industry leader's return on sales is an example of benchmarking. Gross margin analysis is a method of analyzing a company's profitability by examining its gross margin (revenue minus cost of goods sold) over time. Detail analysis and intercompany analysis are not relevant to this scenario.

Question 20

Dynasty Incorporated has the following data available at December 31, 2017:
  Prepare a vertical analysis of Dynasty's balance sheet. Round percentages to one decimal point.

Accepted Answer

The answer of Dynasty Incorporated has the following data available...

Quiz 13: Financial Statement Analysis

Hull Company reports the following data: Based on the above data, what can be said about the Hull Company?

On a common-size income statement, income taxes expense is expressed as a percentage of:

A financial statement that shows each line item as a percentage of one key item on the statement is referred to as a:

You are the CEO of Company A and you are using an industry leader (Leader Company) for benchmarking. Company A is much smaller than Company B in terms of total assets and total sales revenue. You should compare the:

Given the following data: In vertical analysis, net income would be expressed as: (Round your final answer to the nearest whole percent, X%.)

Szidon Company reports the following data: Using benchmarking, what can be said about Szidon Company?

On a common-size balance sheet, each line item is expressed as a percentage of:

Common-size financial statements report only dollar amounts.

A vertical analysis of a balance sheet shows that current assets have increased from 42% to 56%. This means that:

Prepare a vertical analysis for Katrina Corporation using the information shown below. Round percentages to one decimal place.

Wilhelm Company's gross profit percentages for the past 3 years are: Based on the above data, what can be said about the Wilhelm Company?

Benchmarking compares a company to some standard set by others.

Which of the following would be most helpful in the comparison of different size companies?

Benchmarking common size variables against a key competitor provides meaningful information only if the companies are similar in size.

You are using a leading competitor, Company B, for benchmarking your company, Company A. When benchmarking, the gross margin of Company A is expressed as a percentage of:

Reimer Company reports the following data: When evaluating the results of operations, what can be said about Reimer Company?

Given the following data: In vertical analysis, Accounts Receivable, net would be expressed as: (Round your final answer to the nearest whole percent, X%.)

Walton Company's return on sales for the most recent year was 5%. The industry leader reports a return on sales of 7%. The comparison of Walton Company's return on sales to the industry leader is an example of:

Dynasty Incorporated has the following data available at December 31, 2017: Prepare a vertical analysis of Dynasty's balance sheet. Round percentages to one decimal point.