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Exam 14: Financial Statement Analysis

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Question 51

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A company's current ratio and its acid-test ratio are both greater than 1.Payment of an account payable would:

A) increase the current ratio but the acid-test ratio would not be affected.
B) increase the acid-test ratio but the current ratio would not be affected.
C) increase both the current and acid-test ratios.
D) decrease both the current and acid-test ratios.

E) C) and D)
F) A) and D)

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Question 52

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The debt-to-equity ratio at the end of Year 2 is closest to:

A) 0.38
B) 0.13
C) 0.16
D) 0.43

E) B) and D)
F) B) and C)

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Question 53

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Data from Fontecchio Corporation's most recent balance sheet appear below: The corporation's acid-test ratio is closest to:

Brill Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $2,100.The market price of common stock at the end of Year 2 was $2.32 per share. Required: a.What is the company's times interest earned ratio for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's net profit margin percentage for Year 2? e.What is the company's gross margin percentage for Year 2? f.What is the company's return on total assets for Year 2? g.What is the company's return on equity for Year 2? h.What is the company's earnings per share for Year 2? i.What is the company's price-earnings ratio for Year 2? j.What is the company's dividend payout ratio for Year 2? k.What is the company's dividend yield ratio for Year 2? l.What is the company's book value per share at the end of Year 2?

Two-Rivers Inc.(TRI)manufactures a variety of consumer products.The company's founders have run the company for thirty years and are now interested in retiring.Consequently, they are seeking a purchaser, and a group of investors is looking into the acquisition of TRI.To evaluate its financial stability, TRI was requested to provide its latest financial statements and selected financial ratios.Summary information provided by TRI is presented below. Required: a.Calculate the select financial ratios for the fiscal year Year 2. b.Interpret what each of these financial ratios means in terms of TRI's financial stability and operating efficiency.

Last year Javer Corporation had net income of $200,000, income tax expense of $74,000, and interest expense of $20,000.The corporation's times interest earned was closest to:

If a company's operating cycle is much longer than its average payment period for suppliers, it creates the need to borrow money to fund its inventories and accounts receivable.

The company's accounts receivable turnover for Year 2 is closest to:

The company's current ratio at the end of Year 2 is closest to:

The company's operating cycle for Year 2 is closest to:

The average collection period for Year 2 is closest to:

Neelty Corporation has interest expense of $16,000, sales of $600,000, a tax rate of 30%, and after-tax net income of $56,000.The company's times interest earned ratio is closest to:

The formula for the net profit margin percentage is: Net profit margin percentage = Net income ÷ Sales.

The times interest earned ratio is based on net income because that is the amount of earnings that is available for making interest payments.Interest expense is deducted before taxes are determined; creditors have first claim on the earnings before taxes are paid.

All other things the same, when a customer purchases an item for cash, the accounts receivable turnover ratio increases.

The accounts receivable turnover for Year 2 is closest to:

In determining whether a company's financial condition is improving or deteriorating over time, horizontal analysis of financial statement data would be more useful than vertical analysis.

The company's operating cycle for Year 2 is closest to:

The company's price-earnings ratio for Year 2 is closest to:

An increase in the number of shares of common stock outstanding will increase a company's price-earnings ratio if the market price per share remains unchanged.