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Exam 16: Financial Statement Analysis

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Question 31

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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

E) All of the above
F) A) and C)

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Question 32

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If a company's return on assets is substantially lower than its cost of borrowing, then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

A) True
B) False

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Question 33

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Babbitt Corporation has provided the following data from its most recent income statement: Required:Compute the times interest earned ratio. Show your work!

Hyrkas Corporation's most recent balance sheet and income statement appear below: Dividends on common stock during Year 2 totaled $19 thousand. The market price of common stock at the end of Year 2 was $3.00 per share. Required: Compute the following for Year 2: a. Gross margin percentage. b. Earnings per share. c. Price-earnings ratio. d. Dividend payout ratio. e. Dividend yield ratio. f. Return on total assets. g. Return on equity. h. Book value per share. i. Working capital. j. Current ratio. k. Acid-test (quick) ratio. l. Accounts receivable turnover. m. Average collection period. n. Inventory turnover. o. Average sale period. p. Times interest earned ratio. q. Debt-to-equity ratio.

Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730.The acid-test (quick) ratio at the end of Year 2 is closest to:

Data from Dunshee Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,520 and the cost of goods sold was $940.The current ratio at the end of Year 2 is closest to:

Dennisport Corporation has an acid-test ratio of 2.6. It has current liabilities of $49,000 and noncurrent assets of $79,000. The corporation's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory. If Dennisport's current ratio is 4.1, its inventory and prepaid expenses must be:

Mihok Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $5,000. The market price of common stock at the end of Year 2 was $0.97 per share.Required:a. What is the company's earnings per share for Year 2?b. What is the company's price-earnings ratio for Year 2?c. What is thecompany's dividend payout ratio for Year 2?d. What is the company's dividend yield ratio for Year 2?e. What is the company's book value per share at the end of Year 2?

M. K. Berry is the managing director of CE Limited. a small, family-owned company which manufactures cutlery. His company belongs to a trade association which publishes a monthly magazine. The latest issue of the magazine contains a very brief article based on the analysis of the accounting statements published by the 40 companies which manufacture this type of product. The article contains the following table: CE Limited's latest financial statements are as follows: The country in which the company operates has no corporate income tax. No dividends were paid during the year. All sales are on account. Required:a. Calculate each of the ratios listed in the magazine article for this year for CE, and comment briefly on CE Limited's performance in comparison to the industrial averages.b. Explain why it could be misleading to compare CE Limited's ratios with those taken from the article.

Sperle Corporation has provided the following data concerning its stockholders' equity accounts: Net income for Year 2 was $30,400. Dividends on common stock during Year 2 totaled $6,400. The market price of common stock at the end of Year 2 was $3.08 per share.The company's price-earnings ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)

Fayer Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $4,500. The market price of common stock at the end of Year 2 was $10.88 per share.The company's times interest earned ratio for Year 2 is closest to:

Deflorio Corporation's inventory at the end of Year 2 was $180,000 and its inventory at the end of Year 1 was $169,000. The company's total assets at the end of Year 2 were $1,551,000 and its total assets at the end of Year 1 were $1,454,000. Sales amounted to $1,580,000 in Year 2.The company's total asset turnover for Year 2 is closest to:

Sabino Corporation's total common stock was $500,000 at the end of both Year 2 and Year 1. The par value of common stock is $5 per share. The company's total stockholders' equity at the end of Year 2 amounted to $1,125,000 and at the end of Year 1 to $1,090,000. The company's total liabilities and stockholders' equity at the end of Year 2 amounted to $1,581,000 and at the end of Year 1 to $1,540,000. The company's retained earnings at the end of Year 2 amounted to $545,000 and at the end of Year 1 to $510,000. The company's net income in Year 2 was $39,000. The company's book value per share at the end of Year 2 is closest to:

Calin Corporation has total current assets of $615,000, total current liabilities of $230,000, total stockholders' equity of $1,183,000, total plant and equipment (net) of $958,000, total assets of $1,573,000, and total liabilities of $390,000. The company's working capital is:

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:

The gross margin percentage is computed by dividing the gross margin by net income before interest and taxes.

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. Thecompany's dividend payout ratio for Year 2 is closest to: (Round your intermediate calculations to 2 decimal places.)

Which of the following is not a source of financial leverage?

Mayfield Corporation has provided the following financial data: The company's acid-test (quick) ratio is closest to:

Degollado Corporation's most recent income statement appears below: The beginning balance of total assets was $211,000 and the ending balance was $232,000. Required: Compute the return on total assets.