Question 1

Tempel Corporation has provided the following data:  The market price of common stock at the end of Year 2 was $2.77 per share.The company's price-earnings ratio for Year 2 is closest to:
A)9.23 
B)0.35
C)4.54
D)13.40

Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $12,400 ÷ 60,000 shares = $0.21 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $240,000 ÷ $4 per share = 60,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $2.77 ÷ $0.21 = 13.19 (rounded)
A more exact answer with less rounding error is 13.40.

Question 2

The following information relates to Conejo Corporation for last year:  What is Conejo's price-earnings ratio for last year?
A)1.6
B)2.4
C)8.0
D)2.0

Accepted Answer

Dividend yield ratio = Dividends per share ÷ Market price per share
0.10 = $5 per share ÷ Market price per share
Market price per share = $5 per share ÷ 0.10 = $50
Dividend payout ratio = Dividends per share ÷ Earnings per share
0.20 = $5 per share ÷ Earnings per share
Earnings per share = $5 per share ÷ 0.20 = $25
Price-earnings ratio = Market price per share ÷ Earnings per share
= $50 per share ÷ $25 per share = 2.0

Question 3

Weightman Corporation's net operating income in Year 2 was $76,385, net income before taxes was $55,385, and the net income was $36,000.Total common stock was $200,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $983,000 and at the end of Year 1 to $950,000.The market price per share at the end of Year 2 was $7.92.The company's price-earnings ratio for Year 2 is closest to:
A)7.14
B)0.58
C)5.18
D)11.00

Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $36,000 ÷ 50,000 shares = $0.72 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $200,000 ÷ $4 per share = 50,000 shares
Price-earnings ratio = Market price per share ÷ Earnings per share
= $7.92 ÷ $0.72 = 11.00 (rounded)

Question 4

For Year 2, Etzkorn Corporation's sales were $1,480,000, its gross margin was $580,000, its net operating income was $63,714, its net income before taxes was $42,714, and its net income was $29,900.The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000.The company's return on equity for Year 2 is closest to:
A)3.67%
B)60.16%
C)5.24%
D)7.82%

Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $29,900 ÷ $814,500 = 3.67% (rounded)
*Average stockholders' equity = ($829,000 + $800,000)÷ 2 = $814,500

Question 5

Braverman Corporation's net income last year was $75,000 and its interest expense was $10,000.Total assets at the beginning of the year were $650,000 and total assets at the end of the year were $610,000.The corporation's income tax rate was 30%.The corporation's return on total assets for the year was closest to:
A)13.5%
B)12.4%
C)13.0%
D)11.9%

Accepted Answer

Average total assets = ($650,000 + $610,000)÷ 2 = $630,000
Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $75,000 + [$10,000 × (1 - 0.30)] = $82,000
Return on total assets = Adjusted net income ÷ Average total assets
= $82,000 ÷ $630,000 = 13.0%

Question 6

Crosswhite Corporation's sales last year were $1,270,000, its gross margin was $400,000, its net operating income was $53,769, and its net income was $26,500.The company's net profit margin percentage is closest to:
A)31.5%
B)3.2%
C)4.2%
D)2.1%

Accepted Answer

Net profit margin percentage = Net income ÷ Sales
= $26,500 ÷ $1,270,000 = 2.1% (rounded)

Question 7

Kienle Corporation's Year 2 income statement appears below:  The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year 1 to $1,320,000.The company's return on total assets for Year 2 is closest to:
A)2.48%
B)3.14%
C)2.52%
D)3.10%

Accepted Answer

Return on total assets = Adjusted net income* ÷ Average total assets**
= $42,100 ÷ $1,339,500 = 3.14% (rounded)
*Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $33,700 + [$12,000 × (1 - 0.30)] = $42,100
**Average total assets = ($1,359,000 + $1,320,000)÷ 2 = $1,339,500

Question 8

Younis Corporation's income statement appears below:  The company's net profit margin percentage is closest to:
A)37.1%
B)3.5%
C)2.4%
D)1.7%

Accepted Answer

Net profit margin percentage = Net income ÷ Sales
= $20,600 ÷ $1,240,000 = 1.7% (rounded)

Question 9

Keyton Corporation's net operating income in Year 2 was $43,714, net income before taxes was $30,714, and the net income was $21,500.Total common stock was $200,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $1,148,000 and at the end of Year 1 to $1,130,000.The company declared and paid $3,500 dividends on common stock in Year 2.The market price per share was $8.43 at the end of Year 2.The company's dividend payout ratio for Year 2 is closest to:
A)0.8%
B)1.8%
C)16.3%
D)11.4%

Accepted Answer

First, we need to calculate the number of outstanding common shares:

Outstanding common shares = Total common stock / Par value per share
Outstanding common shares = $200,000 / $4
Outstanding common shares = 50,000

Next, we can calculate the earnings per share (EPS):

EPS = Net income / Outstanding common shares
EPS = $21,500 / 50,000
EPS = $0.43 per share

To calculate the dividend per share:

Dividend per share = Dividends paid / Outstanding common shares
Dividend per share = $3,500 / 50,000
Dividend per share = $0.07 per share

To calculate the dividend payout ratio:

Dividend payout ratio = Dividends paid / Net income
Dividend payout ratio = $3,500 / $21,500
Dividend payout ratio = 0.163 or 16.3%

Therefore, the answer is (C) 16.3%. Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $21,500 ÷ 50,000 shares = $0.43 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $200,000 ÷ $4 per share = 50,000 shares
Dividend payout ratio = Dividends per share* ÷ Earnings per share
= $0.07 ÷ $0.43 = 16.3% (rounded)
*Dividends per share = Common dividends ÷ Common shares (see above)
= $3,500 ÷ 50,000 shares = $0.07 per share (rounded)

Question 10

Goldsmith Corporation has provided the following data:  The company's net income in Year 2 was $24,400.The company's book value per share at the end of Year 2 is closest to:
A)$8.32 per share
B)$4.66 per share
C)$14.34 per share
D)$0.27 per share

Accepted Answer

Book value per share = Common stockholders' equity ÷ Number of common shares outstanding*
= $749,000 ÷ 90,000 shares = $8.32 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $270,000 ÷ $3 per share =90,000 shares

Question 11

Sapien Corporation has provided the following data for the most recent year:  The company's gross margin percentage is closest to:
A)52.3%
B)1691.2%
C)5.9%
D)34.3%

Accepted Answer

To calculate the gross margin percentage, we need to use the formula:

Gross Margin Percentage = (Gross Profit / Revenue) x 100

From the provided data, we can see that the Gross Profit is $58,068,000 and the Revenue is $169,169,000. Plugging these values into the formula, we get:

Gross Margin Percentage = (58,068,000 / 169,169,000) x 100
Gross Margin Percentage = 34.3%

Therefore, the closest answer choice is D) 34.3%. Gross margin percentage = Gross margin ÷ Sales
= $460,000 ÷ $1,340,000 = 34.3% (rounded)

Question 12

Linzey Corporation has provided the following data:  The company's net income in Year 2 was $33,000.The company's book value per share at the end of Year 2 is closest to:
A)$22.45 per share
B)$12.45 per share
C)$0.55 per share
D)$15.45 per share

Accepted Answer

Book value per share = (total shareholder equity - preferred equity) / number of common shares outstanding
Total shareholder equity = total assets - total liabilities
From the given data, we can calculate:
Total shareholder equity at the end of Year 2 = $260,000 - $155,000 = $105,000
Common shares outstanding = $180,000 / $30 = 6,000 shares
Book value per share = ($105,000 - 0) / 6,000 shares = $17.50 per share
Therefore, the closest answer choice is D) $15.45 per share. Book value per share = Common stockholders' equity ÷ Number of common shares outstanding*
= $927,000 ÷ 60,000 shares = $15.45 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $120,000 ÷ $2 per share = 60,000 shares

Question 13

Mars Corporation has provided the following data for Year 2:  The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000.The company's return on equity for Year 2 is closest to:
A)5.91%
B)7.40%
C)3.84%
D)71.20%

Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $41,400 ÷ $1,077,500 = 3.84% (rounded)
*Average stockholders' equity = ($1,095,000 + $1,060,000)÷ 2 = $1,077,500

Question 14

Mormino Corporation's income statement appears below:  The company's gross margin percentage is closest to:
A)1888.9%
B)5.3%
C)41.1%
D)69.9%

Accepted Answer

Gross margin percentage is calculated by dividing gross profit by total revenue and multiplying by 100. 
Gross profit = Revenue - Cost of goods sold 
= $134,000 - $79,000 
= $55,000

Therefore, gross margin percentage = (55,000/134,000) x 100 
= 40.92% 
Rounding up, the closest answer choice is C) 41.1%. Gross margin percentage = Gross margin ÷ Sales
= $510,000 ÷ $1,240,000 = 41.1% (rounded)

Question 15

Leflore Corporation has provided the following data:  Dividends on common stock during Year 2 totaled $6,000.The market price of common stock at the end of Year 2 was $1.38 per share.The company's dividend yield ratio for Year 2 is closest to:
A)4.3%
B)1.2%
C)35.0%
D)50.0%

Accepted Answer

Dividend yield ratio = Dividends per share* ÷ Market price per share
= $0.06 ÷ $1.38 = 4.3% (rounded)
Number of common shares outstanding = Common stock ÷ Par value
= $500,000 ÷ $5 per share = 100,000 shares
*Dividends per share = Common dividends ÷ Common shares (see above)
= $6,000 ÷ 100,000 shares = $0.06 per share (rounded)

Question 16

Rawdon Corporation's net operating income in Year 2 was $52,429, net income before taxes was $34,429, and the net income was $24,100.Total common stock was $360,000 at the end of both Year 2 and Year 1.The par value of common stock is $4 per share.The company's total stockholders' equity at the end of Year 2 amounted to $976,000 and at the end of Year 1 to $960,000.The company's earnings per share for Year 2 is closest to:
A)$0.58 per share
B)$0.38 per share
C)$0.27 per share
D)$5.84 per share

Accepted Answer

Earnings per share = Net Income ÷ Average number of common shares outstanding*
= $24,100 ÷ 90,000 shares = $0.27 per share (rounded)
*Number of common shares outstanding = Common stock ÷ Par value
= $360,000 ÷ $4 per share = 90,000 shares

Question 17

Fongeallaz Corporation's income statement for Year 2 appears below:  The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:
A)64.40%
B)8.93%
C)6.75%
D)4.72%

Accepted Answer

Return on equity = Net income ÷ Average stockholders' equity*
= $39,000 ÷ $825,500 = 4.72% (rounded)
*Average stockholders' equity = ($841,000 + $810,000)÷ 2 = $825,500

Question 18

Grosvenor Corporation's most recent income statement appears below:  The gross margin percentage is closest to:
A)80.9%
B)44.7%
C)376.0%
D)26.6%

Accepted Answer

Gross margin percentage = Gross margin ÷ Sales
= $361,000 ÷ $807,000 = $44.7%

Question 19

Valdovinos Corporation has provided the following data:  The company's net profit margin percentage is closest to:
A)38.3%
B)3.5%
C)1.3%
D)2.0%

Accepted Answer

To calculate the net profit margin percentage, we need to divide the net profit by the total revenue and then multiply the result by 100. However, the information provided in the question does not include either the net profit or the total revenue. Therefore, we cannot calculate the net profit margin percentage. Net profit margin percentage = Net income ÷ Sales
= $15,000 ÷ $1,150,000 = 1.3% (rounded)

Question 20

Jester Corporation's most recent income statement appears below:  The beginning balance of total assets was $360,000 and the ending balance was $320,000.The return on total assets is closest to:
A)26.5%
B)18.5%
C)22.6%
D)32.4%

Accepted Answer

To calculate the return on total assets, we need to divide the net income by the average total assets. We can calculate the average total assets by adding the beginning and ending total asset balances and dividing by 2.

Average total assets = ($360,000 + $320,000) / 2 = $340,000

Return on total assets = Net income / Average total assets
= $72,200 / $340,000
= 0.2124 or 21.24%

The closest option to 21.24% is option C) 22.6% which is the best answer. Adjusted net income = Net income + [Interest expense × (1 - Tax rate)]
= $63,000 + [$20,000 × (1 - 0.30)] = $77,000
Average total assets = ($360,000 + $320,000)÷ 2 = $340,000
Return on total assets = Adjusted net income ÷ Average total assets
= $77,000 ÷ $340,000 = 22.6% (rounded)

Quiz 14: Financial Statement Analysis

Tempel Corporation has provided the following data: The market price of common stock at the end of Year 2 was $2.77 per share.The company's price-earnings ratio for Year 2 is closest to:

The following information relates to Conejo Corporation for last year: What is Conejo's price-earnings ratio for last year?

Crosswhite Corporation's sales last year were $1,270,000, its gross margin was $400,000, its net operating income was $53,769, and its net income was $26,500.The company's net profit margin percentage is closest to:

Kienle Corporation's Year 2 income statement appears below: The company's total assets at the end of Year 2 amounted to $1,359,000 and at the end of Year 1 to $1,320,000.The company's return on total assets for Year 2 is closest to:

Younis Corporation's income statement appears below: The company's net profit margin percentage is closest to:

Goldsmith Corporation has provided the following data: The company's net income in Year 2 was $24,400.The company's book value per share at the end of Year 2 is closest to:

Sapien Corporation has provided the following data for the most recent year: The company's gross margin percentage is closest to:

Linzey Corporation has provided the following data: The company's net income in Year 2 was $33,000.The company's book value per share at the end of Year 2 is closest to:

Mars Corporation has provided the following data for Year 2: The company's total stockholders' equity at the end of Year 2 amounted to $1,095,000 and at the end of Year 1 to $1,060,000.The company's return on equity for Year 2 is closest to:

Mormino Corporation's income statement appears below: The company's gross margin percentage is closest to:

Leflore Corporation has provided the following data: Dividends on common stock during Year 2 totaled $6,000.The market price of common stock at the end of Year 2 was $1.38 per share.The company's dividend yield ratio for Year 2 is closest to:

Fongeallaz Corporation's income statement for Year 2 appears below: The company's total stockholders' equity at the end of Year 2 amounted to $841,000 and at the end of Year 1 to $810,000.The company's return on equity for Year 2 is closest to:

Grosvenor Corporation's most recent income statement appears below: The gross margin percentage is closest to:

Valdovinos Corporation has provided the following data: The company's net profit margin percentage is closest to:

Jester Corporation's most recent income statement appears below: The beginning balance of total assets was $360,000 and the ending balance was $320,000.The return on total assets is closest to: