Question 1

K Grocers' 2016 financial statements show net income of $1,505 million, sales of $225,935 million, and average total assets of $46,982 million.
How much is K Grocers' asset turnover for the year?
A) 0.67
B) 4.81
C) 3.2
D) There is not enough information to calculate the ratio

Accepted Answer

Asset turnover = Sales / Average total assets = $225,935 million / $46,982 million = 4.81

Question 2

K Grocers' 2016 financial statements show interest expense of $870 million, net income of $1,505 million, sales of $225,935 million, and average total assets of $23,491 million. Assume that the statutory tax rate is 35%.
How much is K Grocers' profit margin for the year?
A) 0.92%
B) 1.05%
C) 8.81%
D) There is not enough information to calculate the ratio

Accepted Answer

Profit margin = EWI / Sales
= $1,505 million + [$870 million x (1 - 0.35)] / $225,935 million = 0.92%.

Question 3

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute the profit margin, to the nearest hundredth of a percent.

A) 6.85%
B) 32.38%
C) 13.71%
D) 9.19%

Accepted Answer

Profit margin = EWI / Sales revenue = $233,500 / $1,703,130 = 13.71%

Question 4

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute ROA, to the nearest hundredth.

A) 27.30%
B) 13.71%
C) 16.17%
D) 32.38%

Accepted Answer

ROA = EWI / Average total assets = $233,500 / $721,200 = 32.38%

Question 5

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute asset turnover, to the nearest hundredth of a percent.

A) 0.32
B) 0.16
C) 2.36
D) 1.53

Accepted Answer

Asset turnover = Sales revenue / average total assets = $1,703,130 / $721,200 = 2.36

Question 6

Walkie Enterprises reported sales revenue totaling $1,120,000, $1,340,000, and $1,675,000 in the years, 2014, 2015, and 2016, respectively.
Performing horizontal analysis, what is the percentage change for 2016?
A) 25.00%
B) 38.16%
C) 47.16%
D) 14.11%

Accepted Answer

Change in revenue / Revenue in previous year
= ($1,675,000 - $1,340,000) / $1,340,000 = 25.00%

Question 7

Selected balance sheet and income statement information from the 2016 fiscal year end for American Symbol Outfitters follows in thousands:
  A. Calculate the company's return on equity (ROE).
B. Explain what information this provides to management.

Accepted Answer

The answer of Selected balance sheet and income statement information...

Question 8

Peter Gilgen & Co.'s (PG & Co.) recent balance sheet (fiscal year 2016) reported average equity of $112,036 and average total assets of $240,598. Assume that the company's statutory tax rate is 35%. PG & Co.'s recent income statement showed the following):
  A. Calculate the income tax rate on earnings before income taxes.
B. How much is EWI?
C. Calculate ROE and ROA.

Accepted Answer

The answer of Peter Gilgen & Co.'s (PG & Co.)...

Question 9

Selected balance sheet and income statement information from the 2016 fiscal year end for Arrows follows:
  A. Compute return on net operating profit (RNOA).
B. Show that RNOA = Net operating profit margin (NOPM) × Net operating asset turnover (NOAT)

Accepted Answer

The answer of Selected balance sheet and income statement information...

Question 10

Selected balance sheet and income statement information from Edward Electric for fiscal years 2014 through 2016 follows:
  A. Compute times interest earned for each year and discuss any trends.
B. What concerns about Edward Electric's ability to meet its interest obligations might creditors have? Explain.

Accepted Answer

The answer of Selected balance sheet and income statement information...

Question 11

Selected 2016 balance sheet and income statement information for Cloud 9 Super Store and Big T follow:
  A. Calculate the current ratio and quick ratio for both companies.
B. Which company is more liquid?
C. Calculate the times interest earned and debt-to-equity ratio for both companies.
D. Which company is more solvent? Explain.

Accepted Answer

The answer of Selected 2016 balance sheet and income statement...

Question 12

Selected 2016 balance sheet and income statement information for two manufacturing companies: Canyonlands, Inc. and Bryce Corporation follows:
  A. Calculate the current ratio and quick ratio for both companies.
B. Which company is more liquid?
C. Calculate the times interest earned and debt-to-equity ratio for both companies.
D. Which company is more solvent?

Accepted Answer

The answer of Selected 2016 balance sheet and income statement...

Question 13

Selected recent balance sheet and income statement information for Shepherd, Inc. follows:
  A. Calculate accounts receivable turnover (ART) for 2016 and 2015. Has ART improved during the year or worsened?
B. Calculate inventory turnover (INVT) for 2016 and 2015. Has INVT improved during the year or worsened?

Accepted Answer

The answer of Selected recent balance sheet and income statement...

Question 14

Selected recent balance sheet and income statement information for Holiday Corporation follows:
  A Calculate accounts receivable turnover (ART) for 2016 and 2015. Has ART improved during the year or worsened?
B. Calculate inventory turnover (INVT) for 2016 and 2015. Has INVT improved during the year or worsened?

Accepted Answer

The answer of Selected recent balance sheet and income statement...

Question 15

Selected recent balance sheet and income statement information for Catnip, Inc. follows:
  A. Calculate accounts receivable turnover (ART) for 2016 and 2015. Has ART improved during the year or worsened?
B. Calculate inventory turnover (INVT) for 2016 and 2015. Has INVT improved during the year or worsened?

Accepted Answer

The answer of Selected recent balance sheet and income statement...

Question 16

Use the selected balance sheet and income statement information below for Brahtz, Inc. to compute the times interest earned ratio. Explain what information this ratio provides.

Accepted Answer

The answer of Use the selected balance sheet and income...

Question 17

Use the selected balance sheet and income statement information below for Brahtz, Inc. to compute the current ratio. Explain what information this ratio provides.

Accepted Answer

The answer of Use the selected balance sheet and income...

Question 18

Selected 2016 balance sheet and income statement information for two large communication companies, Vista Communication, Inc., and American Phone, Inc., follow:
  A. Compute accounts receivable turnover for Vista Communications Inc. and American Phone.
B. Interpret and comment on the differences between the receivables turnover rates between each company assuming the industry average is 9.0 times.

Accepted Answer

The answer of Selected 2016 balance sheet and income statement...

Question 19

Selected 2016 balance sheet and income statement information for an office supply retailer, Office Supply, Inc., follows (in $ millions):
  Compute accounts receivable turnover and inventory turnover for Office Supply, Inc.

Accepted Answer

The answer of Selected 2016 balance sheet and income statement...

Question 20

Selected balance sheet and income statement information for Peter Gilgen & Co. for 2014 through 2016 follows (millions):
  Compute the return on financial leverage for each year. Interpret these values for Peter Gilgen & Co.

Accepted Answer

The answer of Selected balance sheet and income statement information...

Quiz 5: Analyzing and Interpreting Financial Statements

K Grocers' 2016 financial statements show net income of $1,505 million, sales of $225,935 million, and average total assets of $46,982 million. How much is K Grocers' asset turnover for the year?

K Grocers' 2016 financial statements show interest expense of $870 million, net income of $1,505 million, sales of $225,935 million, and average total assets of $23,491 million. Assume that the statutory tax rate is 35%. How much is K Grocers' profit margin for the year?

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute the profit margin, to the nearest hundredth of a percent.

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute ROA, to the nearest hundredth.

Use the following selected balance sheet and income statement information for Sirius Supply Co. to compute asset turnover, to the nearest hundredth of a percent.

Walkie Enterprises reported sales revenue totaling $1,120,000, $1,340,000, and $1,675,000 in the years, 2014, 2015, and 2016, respectively. Performing horizontal analysis, what is the percentage change for 2016?

Selected balance sheet and income statement information from the 2016 fiscal year end for American Symbol Outfitters follows in thousands: A. Calculate the company's return on equity (ROE). B. Explain what information this provides to management.

Selected balance sheet and income statement information from the 2016 fiscal year end for Arrows follows: A. Compute return on net operating profit (RNOA). B. Show that RNOA = Net operating profit margin (NOPM) × Net operating asset turnover (NOAT)

Use the selected balance sheet and income statement information below for Brahtz, Inc. to compute the times interest earned ratio. Explain what information this ratio provides.

Use the selected balance sheet and income statement information below for Brahtz, Inc. to compute the current ratio. Explain what information this ratio provides.

Selected 2016 balance sheet and income statement information for an office supply retailer, Office Supply, Inc., follows (in $ millions): Compute accounts receivable turnover and inventory turnover for Office Supply, Inc.

Selected balance sheet and income statement information for Peter Gilgen & Co. for 2014 through 2016 follows (millions): Compute the return on financial leverage for each year. Interpret these values for Peter Gilgen & Co.