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Exam 14: Financial Statement Analysis

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Question 61

Multiple Choice

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The current ratio is

A) used to evaluate a company's liquidity and short-term debt paying ability.
B) is a solvency measure that indicated the margin of safety of a noteholder or bondholder.
C) calculated by dividing current liabilities by current assets.
D) calculated by subtracting current liabilities from current assets.

E) None of the above
F) A) and B)

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Question 62

Multiple Choice

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Which of the following would appear as an extraordinary item on the income statement?

A) loss resulting from the sale of fixed assets
B) gain resulting from the disposal of a segment of the business
C) loss from land condemned for public use
D) liquidating dividend

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

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Question 63

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The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the dividend yield for this company? Round your answer to one decimal point.

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Hsu Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $80,000. Hsu Company's times interest earned was

Based on the following data for the current year, what is the accounts receivable turnover?

The percent of fixed assets to total assets is an example of

Those unusual items reported as deductions from income from continuing operations should be listed net of the related income tax.

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

An advantage of the current ratio is that it considers the makeup of the current assets.

An extraordinary item must be either unusual in nature or infrequent in occurrence.

The rate earned on total assets measures the profitability of total assets, without considering how the assets are financed.

An extraordinary loss of $300,000 that results in income tax savings of $90,000 should be reported as an extraordinary loss (net of tax) of $210,000 on the income statement.

A company reports the following:

When computing the rate earned on total common stockholders' equity, preferred stock dividends are subtracted from net income.

The following information pertains to Carlton Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the price earnings ratio for this company? Round your answer to one decimal point.

One reason that a common-size statement is a useful tool in financial analysis is that it enables the user to

The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. Assets Liabilities and Stockholders' Equity Income Statement What is the price earnings ratio for this company?

Dollar amounts of working capital are difficult to assess when comparing companies of different sizes or in comparing such amounts with industry figures.

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will