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Exam 13: Financial Statement Analysis

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Question 61

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The formula for the times interest earned ratio is: Times interest earned = Earnings before interest expense and income taxes ÷ Interest expense.

A) True
B) False

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Question 62

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The Seabury Corporation has a current ratio of 3.5 and an acid-test ratio of 2.8. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventories. Inventory equals $49,000. Seabury Corporation's current liabilities must be:

A) $70,000
B) $100,000
C) $49,000
D) $125,000

E) B) and C)
F) A) and B)

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Question 63

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All other things the same, if long-term debt is exchanged for short-term debt, the debt-to-equity ratio will be unchanged.

When computing the return on total assets, the interest expense is added back to net income to show what earnings would have been if the company had no debt.

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

The gross margin percentage is computed by dividing sales by the gross margin.

A company could improve its acid-test ratio by selling some equipment it no longer needs for cash.

Burdick Corporation has provided the following financial data from its balance sheet: Sales (all on account) in Year 2 amounted to $1,410,000 and the cost of goods sold was $860,000. The company's equity multiplier at the end of Year 2 is closest to:

Hernande Corporation has provided the following data: The company's earnings per share for Year 2 is closest to:

Louie Corporation has provided the following data: $\begin{array} { | l | r | r | } \hline & \text { Y ear 2 } & \text { Year 1 } \\\hline \text { Accounts receivable } & \$ 269,000 & \$ 290,000 \\\hline \text { Inventory } & \$ 190,000 & \$ 160,000 \\\hline \text { Sales, on account } & \$ 1,340,000 & \\\hline \text { Cost of goods sold } & \$ 860,000 & \\\hline\end{array}$ The company's operating cycle for Year 2 is closest to:

Excerpts from Sydner Corporation's most recent balance sheet appear below: Sales on account in Year 2 amounted to $1,390 and the cost of goods sold was $900. The average collection period for Year 2 is closest to:

Wowk Corporation has provided the following financial data: Required: a. What is the company's working capital? b. What is the company's current ratio? c. What is the company's acid-test (quick) ratio?

When computing the return on equity, retained earnings should be excluded from the average total stockholders' equity.

Gehlhausen Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $5,600. The market price of common stock at the end of Year 2 was $5.60 per share. Required: a. What is the company's net profit margin percentage for Year 2? b. What is the company's gross margin percentage for Year 2? c. What is the company's return on total assets for Year 2? d. What is the company's return on equity for Year 2?

Financial statements for Maraby Corporation appear below: Maraby Corporation's inventory turnover for Year 2 was closest to:

Schepp Corporation has provided the following financial data: Required: a. What is the company's times interest earned 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?

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:

Lasch Corporation has provided the following financial data from its balance sheet and income statement: The company's debt-to-equity ratio at the end of Year 2 is closest to:

Guttery Corporation has provided the following financial data from its balance sheet: Sales on account in Year 2 totaled $1,450,000 and cost of goods sold totaled $900,000. The company's average sale period (turnover in days) for 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: