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Exam 15: Financial Statement Analysis

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Question 131

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The market price of Friden Company's common stock increased from $15 to $18. Earnings per share of common stock remained unchanged. The company's price-earnings ratio would:

A) increase.
B) decrease.
C) remain unchanged.
D) impossible to determine.

E) B) and D)
F) A) and B)

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Question 132

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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.

A) True
B) False

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Question 133

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Kestner Corporation has provided the following financial data: Required: a. What is the company's accounts receivable turnover for Year 2? b. What is the company's average collection period (age of receivables) for Year 2? c. What is the company's inventory turnover for Year 2? d. What is the company's average sale period (turnover in days) for Year 2? e. What is the company's operating cycle for Year 2? f. What is the company's total asset turnover for Year 2?

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:

Jepson Corporation's most recent income statement appears below: Required: Compute the gross margin percentage.

Cameron Corporation had 50,000 shares of common stock issued and outstanding that it originally issued for $40 per share. The following information pertains to these shares: $\begin{array}{ll}\text { Book value at end of current year } & \$ 70 \\\text { Market value, beginning of current year} & \$ 85 \\\text { Market value, end of current year } & \$ 90\end{array}$ The total dividend on common stock for the year was $400,000. Cameron Corporation's dividend yield ratio for the year was:

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

Shipley Corporation has provided the following data from its most recent balance sheet: $\begin{array}{lr}\text {Total assets. }&\$760,000\\\text {Total liabilities }&\$590,000\\\text {Total stockholders' equity }&\$170,000\\\end{array}$ The debt-to-equity ratio 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 acid-test ratio at the end of Year 2 is closest to:

Arkin Corporation's total current assets are $290,000, its noncurrent assets are $520,000, its total current liabilities are $210,000, its long-term liabilities are $420,000, and its stockholders' equity is $180,000. Required: Compute the company's working capital. Show your work!

Jaquez Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $10,000. The market price of common stock at the end of Year 2 was $5.45 per share. 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? 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?

All other things the same, when a company increases its inventories in anticipation of later higher sales, the accounts receivable turnover ratio for the current period increases.

All other things the same, if the company purchases equipment on credit, this transaction would have no impact on the company's book value per share.

Pascarelli Corporation's inventory at the end of Year 2 was $122,000 and its inventory at the end of Year 1 was $150,000. Cost of goods sold amounted to $870,000 in Year 2. The company's average sale period (turnover in days) for Year 2 is closest to:

Dratif Corporation's working capital is $33,000 and its current liabilities are $80,000. The corporation's current ratio is closest to:

Karma Corporation has total assets of $190,000 and total liabilities of $90,000. The corporation's debt-to-equity ratio 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 operating cycle for Year 2 is closest to:

Neef Corporation has provided the following financial data from its balance sheet and income statement: -The company's gross margin percentage for Year 2 is closest to:

Dennisport Corporation has an acid-test ratio of 2.5. It has current liabilities of $40,000 and noncurrent assets of $70,000. The corporation's current assets consist of cash, marketable securities, accounts receivable, prepaid expenses, and inventory; it has no short-term notes receivable. If Dennisport's current ratio is 3.1, its inventory and prepaid expenses must be:

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 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?