Question 1

Using the income statement below,develop a common-size statement by filling in the blanks provided.Show your work.Round to one decimal place.
 $$\begin{array} { | l r l | } 
\hline & { \mathbf { 2 0 x \mathbf { x } } } & \mathbf { 2 0 x \mathbf { x } } \
\text { Net sales } & \$ 200,000 & \underline{\quad\quad}\
\text { Cost of goods sold } & 116,000 & \
\text { Gross margin } & \$ 84,000 &\underline{\quad\quad} \
\text { Operating expenses } & 46,000 &\underline{\quad\quad} \
\text { Income before income taxes } & \$ 38,000 & \
\text { Income taxes expense } & 15,200 &\underline{\quad\quad} \
\text { Net income } & \$ 22,800 & \
\hline
\end{array}$$

Accepted Answer

The answer of Using the income statement below,develop a common-size...

Question 2

Lois Kent has owned and managed the operations of a small chain of sporting goods stores for the past two years.She has asked her administrative assistant to provide her with some annual reports of other companies that sell sporting goods as well as some published reports showing norms for the sporting goods industry so that Lois can compare the financial ratios of her company with those of other companies that sell sporting goods.Discuss the limitations of using comparisons with other companies and industry norms,which Lois needs to remember.

Accepted Answer

The answer of Lois Kent has owned and managed the...

Question 3

Days' payable is a measure of

Accepted Answer

Days' payable is a measure of how long it takes a company to pay off its accounts payable. It is an important liquidity ratio that measures a company's ability to meet its short-term obligations.

Question 4

A company with $50,000 in current assets,$25,000 in quick assets,and $30,000 in current liabilities makes a payment of a $1,500 current debt.As a result of this transaction,the current ratio and quick ratio will

Accepted Answer

The answer of A company with $50,000 in current assets,$25,000...

Question 5

The length of the operating cycle equals the days' sales uncollected plus the

Accepted Answer

The operating cycle is the time it takes for a company to convert its inventory into cash. It is calculated as the sum of the days' sales uncollected (how many days it takes for customers to pay) and the days' inventory on hand (how many days it takes to sell inventory). So, the correct choice is B.

Question 6

Cash flows to sales and cash flows to assets are measured in terms of

Accepted Answer

Cash flows to sales and cash flows to assets are measured as a percentage, indicating the proportion of cash flow generated by sales or assets.

Question 7

The following selected amounts were extracted from the financial statements of Flamingo Corporation.
 $$\begin{array} { |l c c c c| } 
\hline & \text { Year 4 } & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \
\text { Net sales } & \$ 116.7 & \$ 113.3 & \$ 110.0 & \$ 100.0 \
\text { Cost of goods sold } & 117.2 & 112.4 & 108.1 & 100.0 \
\text { Gross margin } & 115.8 & 114.9 & 113.2 & 100.0\
\hline
\end{array}$$ 
Prepare a trend analysis for net sales,cost of goods sold,and gross margin.(Round answers to the nearest tenth of 1 percent.)Use Year 1 as the base year.

Accepted Answer

The answer of The following selected amounts were extracted from...

Question 8

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. 
$\begin{array}{c}
 \text {Jasmin Corporation}\
 \text { Partial Balance Sheet }\
 \text {December $ 31,20 \mathrm{xx} $}\\begin{array}{|lr|}
\hline\text { Liabilities and Stockholders' Equity }\
\text { Current liabilities } & \$ 60,000 \
\text { Long-term liabilities } & 90,000 \
\text { Stockholders' equity } & 150,000 \
 \text { Total liabilities and stockholders' equity } & \$ 300,000 \
\hline
\end{array}\end{array}$

$\begin{array}{c}
 \text { Jasmin Corporation}\
 \text {  Income Statement}\
 \text { For the Year Ended December 31, 20xx}\\begin{array}{|ll|}
\hline \text { Net sales } & \$ 80,000 \
 \text { Cost of goods sold } & 45,000 \
 \text { Gross margin } & \$ 35,000 \
\text { Operating expenses } & 15,000 \
 \text { Income before income taxes } & \$ 20,000 \
 \text { Income taxes expense } & 5,000 \
 \text { Net income } & \$ 15,000 \
\hline
\end{array}\end{array}$ 
 Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $0.90 per share during 20xx.
What is the debt to equity ratio for this corporation? Round your answer to one decimal place.

Accepted Answer

The debt to equity ratio is calculated as total liabilities divided by stockholders' equity. Total liabilities are $60,000 (current) + $90,000 (long-term) = $150,000. Stockholders' equity is $150,000. Thus, the debt to equity ratio is $150,000 / $150,000 = 1.0 times.

Question 9

Which of the following is a long-term solvency ratio?

Accepted Answer

Long-term solvency ratios measure a company's ability to pay its long-term debts, and the debt to equity ratio is one of the key ratios used for this purpose. Return on equity and dividends yield are measures of profitability, while payables turnover is a liquidity ratio.

Question 10

The receivable turnover ratio is needed to calculate the

Accepted Answer

The receivable turnover ratio is used to calculate the number of times a company collects its average accounts receivable balance during a period. This ratio can then be used to calculate the average number of days it takes for the company to collect its receivables, which is the days' sales uncollected.

Question 11

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures.
$\begin{array}{c}
 \text {Jasmin Corporation}\
 \text { Partial Balance Sheet }\
 \text {December $ 31,20 \mathrm{xx} $}\\begin{array}{|lr|}
\hline\text { Liabilities and Stockholders' Equity }\
\text { Current liabilities } & \$ 60,000 \
\text { Long-term liabilities } & 90,000 \
\text { Stockholders' equity } & 150,000 \
 \text { Total liabilities and stockholders' equity } & \$ 300,000 \
\hline
\end{array}\end{array}$

$\begin{array}{c}
 \text { Jasmin Corporation}\
 \text {  Income Statement}\
 \text { For the Year Ended December 31, 20xx}\\begin{array}{|ll|}
\hline \text { Net sales } & \$ 80,000 \
 \text { Cost of goods sold } & 45,000 \
 \text { Gross margin } & \$ 35,000 \
\text { Operating expenses } & 15,000 \
 \text { Income before income taxes } & \$ 20,000 \
 \text { Income taxes expense } & 5,000 \
 \text { Net income } & \$ 15,000 \
\hline
\end{array}\end{array}$ 
 Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $0.90 per share during 20xx.
What is the return on equity for this corporation? Round your answer to one decimal place.

Accepted Answer

The answer of The following information pertains to Jasmin Corporation.Assume...

Question 12

A high receivable turnover indicates that

Accepted Answer

A high receivable turnover ratio means that the company is collecting payments from its customers quickly, indicating that the company has efficient credit and collection policies in place. Therefore, customers are making payments very quickly.

Question 13

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. 
$\begin{array}{c}
 \text {Jasmin Corporation}\
 \text { Partial Balance Sheet }\
 \text {December $ 31,20 \mathrm{xx} $}\\begin{array}{|lr|}
\hline\text { Liabilities and Stockholders' Equity }\
\text { Current liabilities } & \$ 60,000 \
\text { Long-term liabilities } & 90,000 \
\text { Stockholders' equity } & 150,000 \
 \text { Total liabilities and stockholders' equity } & \$ 300,000 \
\hline
\end{array}\end{array}$

$\begin{array}{c}
 \text { Jasmin Corporation}\
 \text {  Income Statement}\
 \text { For the Year Ended December 31, 20xx}\\begin{array}{|ll|}
\hline \text { Net sales } & \$ 80,000 \
 \text { Cost of goods sold } & 45,000 \
 \text { Gross margin } & \$ 35,000 \
\text { Operating expenses } & 15,000 \
 \text { Income before income taxes } & \$ 20,000 \
 \text { Income taxes expense } & 5,000 \
 \text { Net income } & \$ 15,000 \
\hline
\end{array}\end{array}$ 
Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $22.50.Jasmin paid dividends of $0.90 per share during 20xx.
What is the price/earnings (P/E)ratio for this corporation? Round your answer to 2 decimal places.

Accepted Answer

The answer of The following information pertains to Jasmin Corporation.Assume...

Question 14

Contrast the circumstances where horizontal analysis would be an effective analysis tool with those where common-sized analysis would be more useful.

Accepted Answer

The answer of Contrast the circumstances where horizontal analysis would...

Question 15

Which of the following is not a profitability ratio?

Accepted Answer

Quick ratio is a liquidity ratio, not a profitability ratio. Return on equity, asset turnover, and return on assets are all commonly used profitability ratios.

Question 16

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. 
$$\begin{array}{l}
\begin{array} { | l r | } 
\hline { \begin{array} { c } 
\text { Jasmin Corporation } \
\text { Partial Balance Sheet } \
\text { December 31, 20xx }
\end{array} } \
\hline  { \text { Liabilities and Stockholders' Equity } } \
\text { Current liabilities } & \$ 60,000 \
\text { Long-term liabilities } & 90,000 \
\text { Stockholders' equity } & 150,000 \
\text { Total liabilities and stockholders' equity } & \$ \$ \$ 300,000 \
\hline
\end{array}\\
\begin{array} { | l r | } 
\hline  { \begin{array} { c } 
\text { Jasmin Corporation } \
\text { Income Statement }\
 \text { For the Year Ended December 31, 20xx } \
\end{array} } \
\hline
\text { Net sales } & \$ 80,000 \
\text { Cost of goods sold } & 45,000 \
\text { Gross margin } & \$ 35,000 \
\text { Operating expenses } & 15,000 \
\text { Income before income taxes } & \$ 20,000 \
\text { Income taxes expense } & 5,000 \
\text { Net income } & \$ 15.000 \
\hline
\end{array}
\end{array}$$ 
 Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $1.25 per share during 20xx.
What is the dividends yield of this corporation? Round your answer to two decimal places.

Accepted Answer

The dividend yield is calculated as dividends per share divided by market price per share. In this case, the dividends per share is $1.25 and the market price per share is $20. Therefore, the dividend yield is $1.25/$20 = 0.0625, or 6.25%.

Question 17

Does the existence of conglomerates make financial performance evaluation easier or more difficult? Why?

Accepted Answer

The answer of Does the existence of conglomerates make financial...

Question 18

A company that is leveraged is one that

Accepted Answer

A company that is leveraged contains debt financing, meaning it has borrowed money to finance its operations or growth. This can increase potential profits but also increases the risk of financial difficulties if the company cannot meet its debt obligations. Therefore, being leveraged is not necessarily a positive or negative trait but is a characteristic that investors should consider when assessing a company's financial health.

Question 19

Eva Gomez is considering investing money in the common stock of Casa Corporation.She has obtained the annual report of the company and calculated the ratios presented in your text.Eva knows that her calculations are accurate,but does not know if the ratios indicate favorable or unfavorable things about the company.What three standards of comparison are available to Eva? What would each of the standards tell her about her ratios?

Accepted Answer

The answer of Eva Gomez is considering investing money in...

Question 20

The following information pertains to Jasmin Corporation.Assume that all balance sheet amounts represent both average and ending figures. 
$\begin{array}{c}
\text {Jasmin Corporation }\
\text {Partial Balance Sheet}\
\text { December $ 31,20 x x $}\\begin{array}{|lr|}
\hline\text { Liabilities and Stockholders' Equity }\
\text { Current liabilities } & \$ 60,000 \
\text { Long-term liabilities } & 90,000 \
\text { Stockholders' equity } & 150,000 \
 \text { Total liabilities and stockholders' equity } & \$ 300,000 \
\hline
\end{array}\end{array}$
 $\begin{array}{c}
\text {Jasmin Corporation}\
\text { Income Statement }\
\text {For the Year Ended December 31, 20xx}\\begin{array}{|lc|}
\hline \text { Net sales } & \$ 80,000 \
 \text { Cost of goods sold } & 45,000 \
 \text { Gross margin } & \$ 35,000 \
 \text { Operating expenses } & 15,000 \
\text { Income before income taxes } & \$ 20,000 \
\text { Income taxes expense } & 5,000 \
 \text { Net income } & \$ 15,000 \
\hline
\end{array}\end{array}$ 
Jasmin Corporation had 6,000 shares of common stock issued and outstanding.The market price of Jasmin common stock on December 31,20xx,was $20.Jasmin paid dividends of $0.90 per share during 20xx.
What is the return on assets for this corporation? Round your answer to one decimal place.

Accepted Answer

The answer of The following information pertains to Jasmin Corporation.Assume...

Quiz 28: Financial Analysis of Performance

Days' payable is a measure of

A company with $50,000 in current assets,$25,000 in quick assets,and $30,000 in current liabilities makes a payment of a $1,500 current debt.As a result of this transaction,the current ratio and quick ratio will

The length of the operating cycle equals the days' sales uncollected plus the

Cash flows to sales and cash flows to assets are measured in terms of

Which of the following is a long-term solvency ratio?

The receivable turnover ratio is needed to calculate the

A high receivable turnover indicates that

Contrast the circumstances where horizontal analysis would be an effective analysis tool with those where common-sized analysis would be more useful.

Which of the following is not a profitability ratio?

Does the existence of conglomerates make financial performance evaluation easier or more difficult? Why?

A company that is leveraged is one that