Question 1

Aladdin Grocer's 2019 financial statements show average shareholders' equity of $15,309 million, net income of $2,940 million, and average total assets of $65,025 million.
How much is Aladdin Grocer's return on assets for the year?
A) 27.42%
B) 4.52%
C) 19.18%
D) 5.56%

Accepted Answer

Return on assets (ROA) is calculated as net income divided by average total assets. ROA = $2,940 million / $65,025 million = 0.0452 or 4.52%.

Question 2

Dils Brothers' 2019 financial statements show average shareholders' equity of $20,412 million, net income of $5,040 million, and average total assets of $86,700 million.
How much is Dils Brothers' return on assets for the year?
A) 11.42%
B) 5.81%
C) 24.69%
D) 4.77%

Accepted Answer

Return on Assets (ROA) is calculated as Net Income divided by Average Total Assets. For Dils Brothers, ROA = ($5,040 million / $86,700 million) * 100 = 5.81%.

Question 3

Aladdin Grocer's 2019 financial statements show net income of $2,940 million, sales of $230,199 million, and average total assets of $69,525 million.
How much is Aladdin Grocer's return on sales for the year?
A) 4.24%
B) 1.28%
C) 35.39%
D) 7.52%

Accepted Answer

Return on sales is calculated as net income divided by sales. For Aladdin Grocer, it is $2,940 million / $230,199 million = 0.0128 or 1.28%.

Question 4

Dils Brothers' 2019 financial statements show net income of $5,040 million, sales of $306,932 million, and average total assets of $86,700 million.
How much is Dils Brothers' return on sales for the year?
A) 4.71%
B) 1.64%
C) 10.20%
D) 5.81%

Accepted Answer

Return on sales is calculated as net income divided by sales. For Dils Brothers, it is $5,040 million / $306,932 million = 0.0164 or 1.64%.

Question 5

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute the gross profit percentage to the nearest hundredth of a percent. $$\begin{array} { c | c | c | c | c } 
\hline \text { Net income } & \begin{array} { c } 
\text { Gross profit } \
\text { on sales }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { total assets }
\end{array} & \text { Sales } & \begin{array} { c } 
\text { Tax rate on } \
\text { operating profit }
\end{array} \
\hline \mathbf { \$ 1 0 4 , 9 4 0 } & \mathbf { \$ 1 , 0 5 0 , 6 0 0 } & \mathbf { \$ 6 3 1 , 0 5 0 } & \mathbf { \$ 2 , 3 7 3 , \mathbf { 6 0 2 } } & \mathbf { 3 5 \% } \
\hline
\end{array}$$
A) 4.42%
B) 8.56%
C) 28.76%
D) 44.26%

Accepted Answer

The answer of Use the following selected 2019 balance sheet...

Question 6

Use the following selected 2019 balance sheet and income statement information for Life Improvements Co. (in millions) to compute the gross profit percentage to the nearest hundredth of a percent. $$\begin{array} {| c | c | c | c | c| } 
\hline \text { Net income } & \begin{array} { c } 
\text { Gross profit } \
\text { on sales }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { total assets }
\end{array} & \text { Sales } & \begin{array} { c } 
\text { Tax rate on } \
\text { operating profit }
\end{array} \
\hline \mathbf { \$ 2 7 9 , 0 4 0 } & \mathbf { \$ 2 , 1 0 1 , 2 0 0 } & \mathbf { \$ 1 , 0 8 1 , \mathbf { 0 0 0 } } & \mathbf { \$ 2 , 7 1 3 , 0 0 0 } & \mathbf { 3 5 \% } \
\hline
\end{array}$$
A) 50.34%
B) 77.45%
C) 10.31%
D) 51.63%

Accepted Answer

The answer of Use the following selected 2019 balance sheet...

Question 7

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute the return on assets to the nearest hundredth. $$\begin{array} {| c | c | c | c | c| } 
\hline \text { Net income } & \begin{array} { c } 
\text { Gross profit } \
\text { on sales }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { total assets }
\end{array} & \text { Sales } & \begin{array} { c } 
\text { Tax rate on } \
\text { operating profit }
\end{array} \
\hline \mathbf { \$ 1 0 4 , 9 4 0 } & \mathbf { \$ 1 , 0 5 0 , 6 0 0 } & \mathbf { \$ 6 3 1 , 0 5 1 } & \mathbf { \$ 2 , 3 0 4 , 7 5 6 } & \mathbf { 3 5 \% } \
\hline
\end{array}$$
A) 14.83%
B) 22.78%
C) 4.42%
D) 16.63%

Accepted Answer

The answer of Use the following selected 2019 balance sheet...

Question 8

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute asset turnover (AT) to the nearest hundredth of a percent. $$\begin{array} { |c | c | c | c | c| } 
\hline \text { Net income } & \begin{array} { c } 
\text { Gross profit } \
\text { on sales }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { total assets }
\end{array} & \text { Sales } & \begin{array} { c } 
\text { Tax rate on } \
\text { operating profit }
\end{array} \
\hline \mathbf { \$ 6 9 , 9 6 0 } & \mathbf { \$ 7 0 0 , 4 0 0 } & \mathbf { \$ 3 6 0 , 6 0 0 } & \mathbf { \$ 1 , 3 5 6 , 5 0 4 } & \mathbf { 3 5 \% } \
\hline
\end{array}$$
A) 0.27
B) 3.76
C) 17.30
D) 5.17

Accepted Answer

Asset turnover (AT) is calculated as Sales divided by Average Total Assets. Using the given numbers: AT = $1,356,504 / $360,600 = 3.76.

Question 9

In trend analysis, of what amount is each item expressed as a percentage?
A) Net income
B) Average total assets
C) Sales revenue
D) A base year amount

Accepted Answer

In trend analysis, each item is expressed as a percentage of a base year amount. This allows for the comparison of financial data over multiple periods to identify trends and patterns.

Question 10

Brown Enterprises reported sales revenue totaling $1,008,000, $1,002,000, and $1,239,000 in the years, 2018, 2019, and 2020, respectively.
Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?
A) 123.69%
B) 22.27%
C) 122.92%
D) 32.91%

Accepted Answer

To calculate the trend percentage for 2020 with 2018 as the base year, you divide the sales revenue of 2020 by the sales revenue of 2018 and then multiply by 100. So, ($1,239,000 / $1,008,000) * 100 = 122.92%.

Question 11

Ben Enterprises reported sales revenue totaling $1,344,000, $1,340,000, and $3,525,000 in the years, 2018, 2019, and 2020, respectively.
Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?
A) 123.58%
B) 262.28%
C) 105.36%
D) 28.21%

Accepted Answer

The trend percentage for 2020 is calculated by taking the sales revenue for 2020, dividing it by the sales revenue for the base year (2018), and then multiplying by 100. So, (3,525,000 / 1,344,000) * 100 = 262.28%.

Question 12

At December 31, 2019, David Bash Company has total assets of $1,000,000, total liabilities of $720,000, and total owner's equity of $280,000.
At December 31, 2019, David Bash Company's debt-to-equity ratio is:
A) 0.28
B) 5.00
C) 0.72
D) 2.57

Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by total owner's equity. For David Bash Company, this is $720,000 / $280,000 = 2.57.

Question 13

At December 31, 2019, Gevas Company has total assets of $3,000,000, total liabilities of $450,000, and total owner's equity of $2,550,000.
At December 31, 2019, Gevas debt-to-equity ratio is:
A) 0.18
B) 4.09
C) 0.65
D) 2.10

Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by total owner's equity. For Gevas Company, this is $450,000 / $2,550,000 = 0.176 or rounded to 0.18.

Question 14

At December 31, 2019, Jose Company has total assets of $1,800,000, total liabilities of $480,000, and total owner's equity of $1,320,000.
At December 31, 2019, Jose Company's debt-to-equity ratio is:
A) 0.36
B) 1.20
C) 2.75
D) 0.27

Accepted Answer

The debt-to-equity ratio is calculated by dividing total liabilities by total owner's equity. For Jose Company, this is $480,000 / $1,320,000 = 0.3636, which rounds to 0.36.

Question 15

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash flow from operating activities by:
A) Current liabilities at the end of the period
B) Current liabilities at the beginning of the period
C) Total liabilities at the middle of the period
D) Average current liabilities for the period

Accepted Answer

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's net cash flow from operating activities by its average current liabilities for the period. This approach provides a more accurate reflection of the company's ability to cover its short-term obligations with cash generated from operations, accounting for any fluctuations in current liabilities throughout the period.

Question 16

Chinchilla Company is preparing trend percentages for its service fees earned for the period 2016 through 2020.
The base year is 2016. The 2019 trend percentage is computed as:
A) 2019 service fees earned divided by 2018 service fees earned
B) 2019 service fees earned divided by 2016 service fees earned
C) 2016 service fees earned divided by 2019 service fees earned
D) 2018 service fees earned divided by 2019 service fees earned

Accepted Answer

Trend percentages are calculated by dividing the amount in the target year by the amount in the base year. Since 2016 is the base year, the 2019 trend percentage is computed by dividing the 2019 service fees earned by the 2016 service fees earned.

Question 17

Begeman Company's net income was $225,000 for 2018, $243,750 for 2019, and $293,160 for 2020. Assume trend percentages for net income over the three-year period are computed with 2018 serving as the base year.
The trend percentage for 2020's net income is:
A) 117.30%
B) 120.92%
C) 130.29%
D) 86.36%

Accepted Answer

The trend percentage is calculated by taking the year of interest (2020) and dividing its net income by the base year's (2018) net income, then multiplying by 100. For 2020, this is ($293,160 / $225,000) * 100 = 130.29%.

Question 18

Javier Company reported net income of $4,550 million in 2019. The weighted average number of common shares outstanding during 2019 was 1,662 million shares. Javier paid $135 million in dividends on preferred stock.
How much is basic earnings per share amount for 2019?
A) $2.61
B) $2.55
C) $2.66
D) $2.75

Accepted Answer

Basic earnings per share (EPS) is calculated by subtracting preferred dividends from net income and then dividing by the weighted average number of common shares outstanding. So, ($4,550 million - $135 million) / 1,662 million shares = $2.66.

Question 19

Zebra Company sells a segment of its operations at a loss. Zebra has not previously experienced such an event and does not expect to again.
The loss from the disposal of the segment should be reported in the income statement as:
A) A separate amount in comprehensive income
B) A separate amount in a discontinued operations section
C) A separate amount in net income from continuing operations
D) As part of cost of goods sold

Accepted Answer

The loss from the disposal of a segment of operations should be reported in the income statement as a separate amount in a discontinued operations section, especially if the disposal represents a strategic shift that has (or will have) a major effect on the company's operations and financial results.

Question 20

Information about a segment of the business that a company sells, abandons, or otherwise disposes of is reported in the:
A) Retained earnings statement
B) Comprehensive income of the income statement
C) Discontinued operations section of the income statement
D) Balance sheet

Accepted Answer

Discontinued operations are reported in a separate section of the income statement to distinguish them from continuing operations, providing a clearer picture of ongoing business performance.

Quiz 14: Analysis and Interpretation of Financial Statements

Aladdin Grocer's 2019 financial statements show average shareholders' equity of $15,309 million, net income of $2,940 million, and average total assets of $65,025 million. How much is Aladdin Grocer's return on assets for the year?

Dils Brothers' 2019 financial statements show average shareholders' equity of $20,412 million, net income of $5,040 million, and average total assets of $86,700 million. How much is Dils Brothers' return on assets for the year?

Aladdin Grocer's 2019 financial statements show net income of $2,940 million, sales of $230,199 million, and average total assets of $69,525 million. How much is Aladdin Grocer's return on sales for the year?

Dils Brothers' 2019 financial statements show net income of $5,040 million, sales of $306,932 million, and average total assets of $86,700 million. How much is Dils Brothers' return on sales for the year?

In trend analysis, of what amount is each item expressed as a percentage?

Brown Enterprises reported sales revenue totaling $1,008,000, $1,002,000, and $1,239,000 in the years, 2018, 2019, and 2020, respectively. Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?

Ben Enterprises reported sales revenue totaling $1,344,000, $1,340,000, and $3,525,000 in the years, 2018, 2019, and 2020, respectively. Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?

At December 31, 2019, David Bash Company has total assets of $1,000,000, total liabilities of $720,000, and total owner's equity of $280,000. At December 31, 2019, David Bash Company's debt-to-equity ratio is:

At December 31, 2019, Gevas Company has total assets of $3,000,000, total liabilities of $450,000, and total owner's equity of $2,550,000. At December 31, 2019, Gevas debt-to-equity ratio is:

At December 31, 2019, Jose Company has total assets of $1,800,000, total liabilities of $480,000, and total owner's equity of $1,320,000. At December 31, 2019, Jose Company's debt-to-equity ratio is:

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash flow from operating activities by:

Chinchilla Company is preparing trend percentages for its service fees earned for the period 2016 through 2020. The base year is 2016. The 2019 trend percentage is computed as:

Begeman Company's net income was $225,000 for 2018, $243,750 for 2019, and $293,160 for 2020. Assume trend percentages for net income over the three-year period are computed with 2018 serving as the base year. The trend percentage for 2020's net income is:

Javier Company reported net income of $4,550 million in 2019. The weighted average number of common shares outstanding during 2019 was 1,662 million shares. Javier paid $135 million in dividends on preferred stock. How much is basic earnings per share amount for 2019?

Zebra Company sells a segment of its operations at a loss. Zebra has not previously experienced such an event and does not expect to again. The loss from the disposal of the segment should be reported in the income statement as:

Information about a segment of the business that a company sells, abandons, or otherwise disposes of is reported in the: