Question 1

Consider the following:  Required:
Prepare a horizontal comparative income statement.

Accepted Answer

The answer of Consider the following:  Required:
Prepare a horizontal...

Question 2

Perform a vertical analysis of the following comparative income statements for Cheng Corporation. Use net sales as the comparative base.

Accepted Answer

The answer of Perform a vertical analysis of the following...

Question 3

Match the terms with the definitions.
-The ratio of common stockholders' equity to the number of common shares outstanding at the end of the year.
A)accounts receivable turnover
B)book value per share
C)working capital
D)current ratio (working capital ratio)
E)earnings per share
F)gross profit ratio
G)vertical analysis
H)times interest earned ratio
I)leverage measures
J)return on common stockholders' equity
K)quick ratio (acid-test ratio)
L)profitability
M)operating expense ratio

Accepted Answer

Book value per share is the ratio of common stockholders' equity to the number of common shares outstanding at the end of the year.

Question 4

Use the following comparative income statements and balance sheets to complete the required ratio analysis.   Additional information:
All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable (net), $73,800; merchandise inventory, $153,100; total assets, $906,900; common stockholders' equity, $527,200; and common shares outstanding, 42,000.  Required:
Prepare a liquidity analysis by calculating for 20-B and 20-C the (a) current ratio, (b) quick ratio, (c) accounts receivable turnover, and (d) merchandise inventory turnover. Indicate whether there has been an improvement or not from 20-B to 20-C. Round all answers to two decimal places.

Accepted Answer

The answer of Use the following comparative income statements and...

Question 5

Dividing the net income for the year by the average number of common shares outstanding during the year (if only common stock is outstanding) is the calculation for the
A) return on stockholders' equity.
B) return on assets.
C) earnings per share.
D) book value per share.

Accepted Answer

Dividing the net income for the year by the average number of common shares outstanding during the year gives the earnings per share. This calculation shows how much income is generated per share of common stock.

Question 6

Use the following comparative income statements and balance sheets to complete the required ratio analysis:   Additional information:
All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable (net), $73,800; merchandise inventory, $139,200; total assets, $906,900; common stockholders' equity, $527,200; and common shares outstanding, 42,000.  Required:
Analyze for 20-B and 20-C the extent to which this corporation is being financed by debt using the (a) ratio of liabilities to stockholders' equity, and analyze its ability to meet its debt obligation using the (b) times interest earned ratio. Indicate whether there has been an improvement or not from 20-B to 20-C. Round all answers to two decimal places.

Accepted Answer

The answer of Use the following comparative income statements and...

Question 7

Book value per share of common stock is calculated by dividing the
A) number of common shares outstanding at year end by the common stockholders' equity.
B) net income available to common stockholders by the average number of common shares outstanding.
C) common stockholders' equity by the number of common shares outstanding at year end.
D) total liabilities by the total stockholders' equity.

Accepted Answer

Book value per share of common stock is calculated by dividing the common stockholders' equity by the number of common shares outstanding at year end. This provides the amount of net assets per share that would be distributed to common stockholders if the company were to liquidate. Option A only provides the number of common shares outstanding, not the equity value, while option B calculates net income per share instead of book value per share. Option D calculates the debt-to-equity ratio.

Question 8

Consider the following:
​  Required:
Prepare a vertical comparative income statement basing percentages on net sales for each year.

Accepted Answer

The answer of Consider the following:
​  Required:
Prepare a vertical...

Question 9

Match the terms with the definitions.
-The ratio of current assets to current liabilities.
A)accounts receivable turnover
B)book value per share
C)working capital
D)current ratio (working capital ratio)
E)earnings per share
F)gross profit ratio
G)vertical analysis
H)times interest earned ratio
I)leverage measures
J)return on common stockholders' equity
K)quick ratio (acid-test ratio)
L)profitability
M)operating expense ratio

Accepted Answer

The current ratio (working capital ratio) is the ratio of current assets to current liabilities.

Question 10

Match the terms with the definitions.
-The ratio of gross profit to net sales.
A)accounts receivable turnover
B)book value per share
C)working capital
D)current ratio (working capital ratio)
E)earnings per share
F)gross profit ratio
G)vertical analysis
H)times interest earned ratio
I)leverage measures
J)return on common stockholders' equity
K)quick ratio (acid-test ratio)
L)profitability
M)operating expense ratio

Accepted Answer

The gross profit ratio is the ratio of gross profit to net sales.

K
 The quick ratio (acid-test ratio) measures a company's ability to pay its short-term liabilities with its most liquid assets. It is calculated by subtracting inventory from current assets and dividing the result by current liabilities.

C
 Working capital is the difference between a company's current assets and its current liabilities. It represents the amount of funds available to meet short-term obligations.

D
 The current ratio (working capital ratio) compares a company's current assets to its current liabilities. It indicates whether a company can meet its short-term obligations with its current assets.

E
 Earnings per share (EPS) is the portion of a company's profit that is allocated to each outstanding share of common stock.

J
 Return on common stockholders' equity measures a company's profitability by comparing its net income to the amount of equity held by common stockholders.

L
 Profitability refers to a company's ability to generate profit and is typically measured using metrics such as gross profit, net income, and return on equity.

M
 The operating expense ratio measures a company's operating expenses as a percentage of its net sales.

The answer is:
F, K, C, D, E, J, L, M

Question 11

Consider the following:  $\begin{array}{l}
\text { Additional information: }\
\begin{array}{lr}
\text { Total stockholders' equity, January 1, 20-- } & \$ 71,250 \
\text { Accounts receivable, January 1, 20-- } & 19,650 \
\text { Net income for 20-- } & 21,600 \
\text { Merchandise inventory, January 1, 20-- } & 60,750 \
\text { Net credit sales for 20-- } & 105,000
\end{array}
\end{array}$ Required:
You have been provided with the balance sheet for Santos Tier I Center. Calculate the following ratios and round answers to two decimal places.

Accepted Answer

The answer of Consider the following:  \(\begin{array}{l}
\text { Additional...

Question 12

A company has 6,000 shares of common stock outstanding and the total common stockholders' equity is $1,500,000. The book value per share of common stock is
A) $.004.
B) $2.50.
C) $4.00.
D) $250.00.

Accepted Answer

The book value per share is calculated by dividing the total common stockholders' equity by the number of shares outstanding. $1,500,000 / 6,000 shares = $250.00 per share.

Question 13

The net income for the year ended was $300,000. Common stockholders' equity at the beginning of the year was $1,400,000 and $1,600,000 at the end of the year. The return on common stockholders' equity would be
A) 18.75%.
B) 20.00%.
C) 21.43%.
D) 87.50%.

Accepted Answer

The answer of The net income for the year ended...

Question 14

A corporation has 2,000 shares of $50 par, 10% preferred stock, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. The earnings per share of common stock would be
A) $10.83.
B) $31.25.
C) $40.00.
D) $41.67.

Accepted Answer

The answer of A corporation has 2,000 shares of $50...

Question 15

Use the comparative income statements and balance sheets below to complete the required ratio analysis.   Additional information:
All sales are made on account. Balances of selected accounts for December 31, 20-A are accounts receivable (net), $73,800; merchandise inventory, $139,200; total assets, $906,900; common stockholders' equity, $527,200; and common shares outstanding 42,000. $\begin{array}{lrr}&20-\mathrm{C}&20-\mathrm{B}\
\text { Number of common shares } & 42,000 & 42,000 \
\text { Dividends paid } & \$ 44,400 & \$ 49,000
\end{array}$ Prepare a profitability analysis by calculating for 20-B and 20-C the (a) net sales to assets, (b) return on total assets, (c) return on common stockholders' equity, (d) earnings per share, and (e) book value per share. Indicate whether there has been an improvement or not from 20-B to 20-C. Round to two decimal places.

Accepted Answer

The answer of Use the comparative income statements and balance...

Question 16

Net income divided by average common stockholders' equity is the calculation for the
A) ratio of net sales to assets.
B) return on total assets.
C) return on common stockholders' equity.
D) earnings per share.

Accepted Answer

Dividing net income by average common stockholders' equity gives the return on common stockholders' equity. This ratio shows the percentage return that a company has generated for its common shareholders' equity.

Question 17

Match the terms with the definitions.
-The excess of a company's current assets over current liabilities.
A)accounts receivable turnover
B)book value per share
C)working capital
D)current ratio (working capital ratio)
E)earnings per share
F)gross profit ratio
G)vertical analysis
H)times interest earned ratio
I)leverage measures
J)return on common stockholders' equity
K)quick ratio (acid-test ratio)
L)profitability
M)operating expense ratio

Accepted Answer

Working capital is the excess of a company's current assets over its current liabilities.

Question 18

Dividing quick assets by current liabilities is the calculation for the
A) current ratio.
B) return on investment.
C) acid-test ratio.
D) ratio of liabilities to stockholders' equity.

Accepted Answer

Dividing quick assets (assets that can be easily converted into cash) by current liabilities gives us the acid-test ratio, also known as the quick ratio. This ratio measures a company's ability to pay off its current liabilities with its most liquid assets. The current ratio (A) is calculated by dividing current assets by current liabilities and includes all current assets, not just the most liquid ones. Return on investment (B) is a measure of profitability, not liquidity. The ratio of liabilities to stockholders' equity (D) is a measure of a company's leverage, not its liquidity.

Question 19

The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be
A) 0.05.
B) 10.5.
C) 11.5.
D) 16.5.

Accepted Answer

The answer of The net income of a company for...

Question 20

The net income for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was
A) 16.7%.
B) 14.3%.
C) 26.4%.
D) 86.0%.

Accepted Answer

To find the percent change, we need to use the following formula:

percent change = (new value - old value) / old value x 100%

percent change = ($270,000 - $315,000) / $315,000 x 100%
percent change = -$45,000 / $315,000 x 100%
percent change = -14.3%

Since the percent change is a decrease, we choose the letter B as the best answer.

Quiz 24: Analysis of Financial Statements

Consider the following: Required: Prepare a horizontal comparative income statement.

Perform a vertical analysis of the following comparative income statements for Cheng Corporation. Use net sales as the comparative base.

Match the terms with the definitions. -The ratio of common stockholders' equity to the number of common shares outstanding at the end of the year.

Dividing the net income for the year by the average number of common shares outstanding during the year (if only common stock is outstanding) is the calculation for the

Book value per share of common stock is calculated by dividing the

Consider the following: Required: Prepare a vertical comparative income statement basing percentages on net sales for each year.

Match the terms with the definitions. -The ratio of current assets to current liabilities.

Match the terms with the definitions. -The ratio of gross profit to net sales.

A company has 6,000 shares of common stock outstanding and the total common stockholders' equity is $1,500,000. The book value per share of common stock is

The net income for the year ended was $300,000. Common stockholders' equity at the beginning of the year was $1,400,000 and $1,600,000 at the end of the year. The return on common stockholders' equity would be

A corporation has 2,000 shares of $50 par, 10% preferred stock, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. The earnings per share of common stock would be

Net income divided by average common stockholders' equity is the calculation for the

Match the terms with the definitions. -The excess of a company's current assets over current liabilities.

Dividing quick assets by current liabilities is the calculation for the

The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be

The net income for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was

Quiz 24: Analysis of Financial Statements

Consider the following: Required: Prepare a horizontal comparative income statement.

Perform a vertical analysis of the following comparative income statements for Cheng Corporation. Use net sales as the comparative base.

Match the terms with the definitions. -The ratio of common stockholders' equity to the number of common shares outstanding at the end of the year.

Dividing the net income for the year by the average number of common shares outstanding during the year (if only common stock is outstanding) is the calculation for the

Book value per share of common stock is calculated by dividing the

Consider the following: ​ Required: Prepare a vertical comparative income statement basing percentages on net sales for each year.

Match the terms with the definitions. -The ratio of current assets to current liabilities.

Match the terms with the definitions. -The ratio of gross profit to net sales.

A company has 6,000 shares of common stock outstanding and the total common stockholders' equity is $1,500,000. The book value per share of common stock is

The net income for the year ended was $300,000. Common stockholders' equity at the beginning of the year was $1,400,000 and $1,600,000 at the end of the year. The return on common stockholders' equity would be

A corporation has 2,000 shares of $50 par, 10% preferred stock, and 6,000 shares of common stock outstanding. The net income for the year is $250,000. The earnings per share of common stock would be

Net income divided by average common stockholders' equity is the calculation for the

Match the terms with the definitions. -The excess of a company's current assets over current liabilities.

Dividing quick assets by current liabilities is the calculation for the

The net income of a company for the year just ended is $230,000. Income tax is $80,500 and interest expense is $20,000. The number of times interest was earned would be

The net income for a company was $315,000 last year and is $270,000 this year. The percent of increase or decrease was

Consider the following: Required: Prepare a vertical comparative income statement basing percentages on net sales for each year.