Ch.14 Test Bank Docx Financial Statement Analysis - MCQ Test Bank | Managerial Accounting - 6th Edition by Braun and Tietz by Karen W. Braun, Wendy M Tietz. DOCX document preview.
Managerial Accounting, 6e (Braun et al.)
Chapter 14 Financial Statement Analysis
14.1 Perform a horizontal analysis of financial statements
1) Generally, using more than one year of data to analyze company performance is desirable.
Diff: 1
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
2) Investors and creditors generally evaluate a company by using a single year's data.
Diff: 1
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
3) Most financial statement analysis covers trends of more than one year.
Diff: 1
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
4) Horizontal analysis is the study of percentage changes in comparative financial statements.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
5) Horizontal analysis and vertical analysis are used to analyze the performance of a single company.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
6) In a horizontal analysis, the earlier period is the base period.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
7) A trend percentage is computed by dividing the dollar amount of change by the base-year amount.
Diff: 1
LO: 14-1
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
8) In a horizontal analysis, the actual dollar change is a better analytical tool than knowing the percentage change.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
9) The study of percentage changes in comparative financial statements is an example of
A) vertical analysis.
B) trend analysis.
C) benchmarking.
D) horizontal analysis.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
10) Which type of analysis compares the data of the current year to the data of the previous year in both percentage and dollar amount of increase or decrease?
A) Vertical analysis
B) Trend analysis
C) Horizontal analysis
D) Benchmarking
Diff: 1
LO: 14-1
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
11) Using a base year as 100% and expressing other years as a percentage of the base year is an example of
A) trend analysis.
B) vertical analysis.
C) horizontal analysis.
D) benchmarking.
Diff: 1
LO: 14-1
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
12) Which type of analysis includes the computation of the percentage change in total assets between two balance sheet dates?
A) Profitability
B) Vertical
C) Horizontal
D) Capital
Diff: 1
LO: 14-1
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
13) Which of the following types of analysis include trend percentage analysis?
A) Vertical
B) Horizontal
C) Benchmarking
D) Profitability
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14) The comparison of operating expenses in Year 1 and Year 2 would be included in which of the following types of analysis?
A) Profitability
B) Capital
C) Horizontal
D) Trend
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
15) An accurate description of horizontal analysis would be which of the following?
A) Study of percentage changes in various financial statement amounts from year to year
B) Study of changes in individual financial statement amounts as a percentage of a related base amount
C) Study of changes in key financial ratios from year to year
D) Study of changes in retained earning only from beginning of the year to the end of the year.
Diff: 1
LO: 14-1
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
16) Pip Corporation uses horizontal analysis to compare its income statement from year to year. Pip Corporation reported the following data last year as well as the percent change when compared to the current year:
Total Last Year % Change in Current Year
Sales Revenue $850,000 10.00%
Cost of Goods Sold $120,000 1.0%
Gross Profit $730,000
What is the Sales Revenue in the current year?
A) $935,000
B) $85,000
C) $765,000
D) $850,000
Diff: 2
LO: 14-1
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
17) Pip Corporation uses horizontal analysis to compare its income statement from year to year. Pip Corporation reported the following data last year as well as the percent change when compared to the current year:
Total Last Year % Change in Current Year
Sales Revenue $630,000 6.00%
Cost of Goods Sold $130,000 5.0%
Gross Profit $500,000
What is the Cost of Goods Sold in the current year?
A) $6,500
B) $136,500
C) $123,500
D) $130,000
Diff: 2
LO: 14-1
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
18) Pip Corporation uses horizontal analysis to compare its income statement from year to year. Pip Corporation reported the following data last year as well as the percent change when compared to the current year:
Total Last Year % Change in Current Year
Sales Revenue $750,000 6.00%
Cost of Goods Sold $180,000 1.0%
Gross Profit $570,000
What is the Gross Profit in the current year?
A) $570,000
B) $613,200
C) $604,200
D) $598,500
Diff: 2
LO: 14-1
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
19) A company reported the following amounts of net income:
Year 1 | $13,000 |
Year 2 | $20,000 |
Year 3 | $31,500 |
Which of the following is the percentage change from Year 2 to Year 3?
A) 53.85%
B) 57.50%
C) 142.31%
D) 153.85%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
20) A company reported the following amounts of net income:
Year 1 | $10,000 |
Year 2 | $21,000 |
Year 3 | $39,500 |
Which of the following is the percentage change from Year 1 to Year 2?
A) 210.00%
B) 295.00%
C) 110.00%
D) 88.10%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
21) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $82,600 | $67,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $78,500 | $62,000 |
Long-term liabilities | $36,000 | $30,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $607,700 | $515,000 |
COGS | $469,700 | $385,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | $49,080 | $52,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to current liabilities?
A) Current liabilities saw a 26.61% increase from the prior year to the current year.
B) Current liabilities are 165.40% of total capital.
C) The current ratio is 1.33.
D) Current liabilities saw a 18.89% increase from the prior year to the current year.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
22) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Cash | $75,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $71,500 | $55,000 |
Long-term liabilities | $36,000 | $30,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $607,700 | $515,000 |
COGS | $469,700 | $385,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | 48,300 | $52,000 |
Net income before taxes | 89,700 | $78,000 |
Income tax expense | 20,700 | $18,000 |
Net Income | 69,000 | $60,000 |
What would a horizontal analysis report with respect to net income before income tax expense and net income?
A) Both net income before tax expense and net income were 11% of net sales revenue.
B) Both net income before income tax expense and net income increased by $129,000.
C) The current ratio is 1.06.
D) There was an increase in both net income before income tax expense and net income of 15%.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
23) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $75,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $72,500 | $56,000 |
Long-term liabilities | $35,000 | $29,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $607,700 | $515,000 |
COGS | $469,700 | $385,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | $49,080 | $52,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to long-term liabilities?
A) Long-term liabilities increased by $6,000.
B) Long-term liabilities decreased by 29.46%.
C) Long-term liabilities increased by 17.14%.
D) Long-term liabilities decreased by $16,500.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
24) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $75,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $71,500 | $55,000 |
Long-term liabilities | $36,000 | $30,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $607,700 | $515,000 |
COGS | $470,700 | $386,000 |
Gross Profit | $137,000 | $129,000 |
Selling/General expenses | $48,080 | $51,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to selling/general expenses?
A) There was a 5.73% decrease from prior to current year.
B) There was a 5.73% increase from prior to current year.
C) The current ratio is 1.06.
D) Selling/general expenses are 7.91% of net sales revenue.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
25) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $75,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $71,500 | $55,000 |
Long-term liabilities | $36,000 | $30,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $611,700 | $519,000 |
COGS | $473,700 | $389,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | $49,080 | $52,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to net sales revenue?
A) There is a sales return of $0.11.
B) There was an increase of 17.86% in net sales revenue.
C) The cost of goods sold is 77.44% of net sales revenue.
D) There is an accounts receivable turnover of 10.30 times.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
26) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $75,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $71,500 | $55,000 |
Long-term liabilities | $36,000 | $30,000 |
Common stock (5,000 shares) | $53,600 | $42,000 |
Retained earnings | $25,100 | $17,000 |
Net sales revenue | $613,700 | $515,000 |
COGS | $475,700 | $385,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | $49,080 | $52,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to common stock?
A) Stockholders' equity is 68.11% of total capital.
B) Increase of $11,600 in common stock
C) 23.56% increase from prior to current year of cost of goods sold
D) Sales return of $0.11
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
27) The Tarboro Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Cash | $80,600 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $71,500 | $55,000 |
Long-term liabilities | $41,000 | $30,000 |
Common stock (5,000 shares) | $47,460 | $42,000 |
Retained earnings | $31,240 | $17,000 |
Net sales revenue | $607,700 | $515,000 |
COGS | $469,700 | $385,000 |
Gross Profit | $138,000 | $130,000 |
Selling/General expenses | $49,080 | $52,000 |
Net income before taxes | $88,920 | $78,000 |
Income tax expense | $20,520 | $18,000 |
Net Income | $68,400 | $60,000 |
What would a horizontal analysis report with respect to current assets?
A) Inventory turnover of 5.83 times
B) Current ratio of 2.67
C) A 32.78% increase in current assets
D) Current assets as 32.78% of total assets
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
28) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $82,500 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $618,000 | $515,000 |
COGS | $478,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $47,860 | $50,000 |
Net income before taxes | $92,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $69,000 | $60,000 |
With respect to current liabilities, what would a horizontal analysis report?
A) The current ratio is 2.26.
B) Current liabilities are 1.24% of total capital.
C) Current liabilities saw a 50.00% increase from the prior year to the current year.
D) Current liabilities saw a 33.33% increase from the prior year to the current year.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
29) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Cash | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $82,500 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $618,000 | $515,000 |
COGS | $478,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $51,860 | $50,000 |
Net income before taxes | $88,000 | $80,000 |
Income tax expense | $22,000 | $20,000 |
Net Income | $66,000 | $60,000 |
With respect to net income before income tax expense and net income, what would a horizontal analysis report?
A) There was an increase in both net income before income tax expense and net income of 10%.
B) Both net income before income tax expense and net income increased by $6,000.
C) The current ratio is 27.76
D) Both net income before tax expense and net income were 11% of net sales revenue.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
30) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $87,500 | $55,000 |
Long-term liabilities | $33,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $618,000 | $515,000 |
COGS | $478,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $47,860 | $50,000 |
Net income before taxes | $92,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $69,000 | $60,000 |
With respect to long-term liabilities, what would a horizontal analysis report?
A) Long-term liabilities decreased by 9.09%.
B) Long-term liabilities increased by $3,000.
C) Long-term liabilities increased by 9.09%.
D) Long-term liabilities decreased by $3,000.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
31) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $50,200 | $40,000 |
Current liabilities | $81,500 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $618,000 | $515,000 |
COGS | $478,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $51,860 | $50,000 |
Net income before taxes | $88,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $65,000 | $60,000 |
With respect to selling/general expenses, what would a horizontal analysis report?
A) The current ratio is 0.44.
B) There was a 3.72% increase from prior to current year.
C) There was a 3.72% decrease from prior to current year.
D) Selling/general expenses are 106.96% of net sales revenue.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
32) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $82,500 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $624,000 | $515,000 |
COGS | $484,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $47,860 | $50,000 |
Net income before taxes | $92,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $69,000 | $60,000 |
With respect to net sales revenue, what would a horizontal analysis report?
A) There was an increase of 21.17% in net sales revenue.
B) There is a sales return of 4.72%.
C) The cost of goods sold is 77.59 % of net sales revenue.
D) There is an accounts receivable turnover of 10.51 times.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
33) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $51,200 | $40,000 |
Current liabilities | $82,500 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $53,800 | $42,000 |
Retained earnings | $12,500 | $17,000 |
Net sales revenue | $618,000 | $515,000 |
COGS | $478,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $47,860 | $50,000 |
Net income before taxes | $92,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $69,000 | $60,000 |
With respect to common stock, what would a horizontal analysis report?
A) Stockholders' equity as 81.15% of total capital
B) Sales return of 11.17%
C) 24.19% increase from prior to current year of cost of goods sold
D) Increase of $11,800 in common stock
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
34) The Fountain Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Cash | $76,200 | $60,000 |
A/R | $59,400 | $44,000 |
Mdse. Inventory | $64,400 | $40,000 |
Current liabilities | $95,700 | $55,000 |
Long-term liabilities | $38,000 | $30,000 |
Common stock (5,000 shares) | $47,880 | $42,000 |
Retained earnings | $18,420 | $17,000 |
Net sales revenue | $619,000 | $515,000 |
COGS | $479,140 | $385,000 |
Gross Profit | $139,860 | $130,000 |
Selling/General expenses | $47,860 | $50,000 |
Net income before taxes | $92,000 | $80,000 |
Income tax expense | $23,000 | $20,000 |
Net Income | $69,000 | $60,000 |
With respect to current assets, what would a horizontal analysis report?
A) Inventory turnover of 1.29 times
B) Current ratio of 2.09
C) Current assets as 100.00% of total assets
D) A 38.89% increase in current assets
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
35) Use the following information to do a horizontal analysis of Ranger Company's income statement for the current year and prior year:
Account | Current year | Prior year | Dollar Change | % Change |
Cost of goods sold | $381,000 | $300,000 | ||
Selling/general expense | $62,000 | $40,000 | ||
Gross profit | $109,600 | $77,800 | ||
Net income | $21,160 | $22,000 |
What is the percentage change in net income?
A) 3.97%
B) -3.82%
C) 40.87%
D) 29.01%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
36) Use the following information to do a horizontal analysis of Ranger Company's income statement for the current year and prior year:
Account | Current year | Prior year | Dollar Change | % Change |
Cost of goods sold | $381,000 | $300,000 | ||
Selling/general expense | $62,000 | $40,000 | ||
Gross profit | $112,600 | $78,800 | ||
Net income | $17,160 | $22,000 |
What is the dollar change in gross profit?
A) $(95,440)
B) $(78,800)
C) $56,800
D) $33,800
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
37) Use the following information to do a horizontal analysis of Ranger Company's income statement for the current year and prior year
Account | Current year | Prior year | Dollar Change | % Change |
Cost of goods sold | $381,000 | $303,000 | ||
Selling/general expense | $63,000 | $49,000 | ||
Gross profit | $102,600 | $76,800 | ||
Net income | $17,160 | $22,000 |
What is the percentage change in cost of goods sold?
A) 79.53%
B) 25.74%
C) 28.57%
D) 22.22%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
38) Use the following information to do a horizontal analysis of Ranger Company's income statement for the current year and prior year:
Account | Current year | Prior year | Dollar Change | % Change |
Cost of goods sold | $384,000 | $304,000 | ||
Selling/general expense | $70,000 | $42,000 | ||
Gross profit | $102,600 | $76,800 | ||
Net income | $23,160 | $22,000 |
What is the dollar change in selling/general expenses?
A) $(1,160)
B) $80,000
C) $28,000
D) $(112,000)
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
39) A company reported the following amounts of net income:
Year 1 | $120,960 |
Year 2 | $156,200 |
Year 3 | $187,488 |
Which of the following is the percentage change from Year 2 to Year 3?
A) 20.03%
B) 55.00%
C) 19.03%
D) 29.13%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
40) A company reported the following amounts of net income:
Year 1 | $126,960 |
Year 2 | $158,200 |
Year 3 | $197,488 |
Which of the following is the percentage change from Year 1 to Year 2?
A) 24.83%
B) 24.61%
C) 25.83%
D) 55.55%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
41) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $51,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $61,500 | $50,000 |
Current liabilities | $35,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $71,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $54,500 | $35,000 |
What would a horizontal analysis report with respect to current liabilities show?
A) Current liabilities are 28.42% of total capital.
B) Current liabilities saw a 15.25% increase from the prior year to the current year.
C) The current ratio is 5.44.
D) Current liabilities saw a 18.00% increase from the prior year to the current year.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
42) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Cash | $55,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $45,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $71,000 | $50,000 |
Income tax expense | $18,500 | $15,000 |
Net Income | $52,500 | $35,000 |
What would a horizontal analysis report with respect to net income show?
A) Both net income before tax expense and net income are 8.82% of net sales revenue.
B) There was an increase in net income of 50.00%.
C) Both net income before income tax expense and net income increased by $17,500.
D) The current ratio is 4.33.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
43) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $51,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $47,400 | $30,000 |
Long-term liabilities | $20,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $71,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $54,500 | $35,000 |
What would a horizontal analysis report with respect to long-term liabilities show?
A) The debt ratio is 35.32%.
B) Long-term liabilities increased by 58.00%.
C) The current ratio is 4.06%.
D) Long-term liabilities decreased by $7,400.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
44) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $51,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $41,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $41,000 | $50,000 |
Net income before taxes | $74,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $57,500 | $35,000 |
What would a horizontal analysis report with respect to selling/general expenses show?
A) A 71.30% increase
B) Selling/general expenses as 6.89% of net sales revenue
C) A current ratio of 4.65
D) A 18.00% decrease
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
45) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $51,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $41,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $599,000 | $500,000 |
COGS | $484,000 | $400,000 |
Gross Profit | $115000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $44,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $54,500 | $35,000 |
What would a horizontal analysis report with respect to net sales revenue show?
A) Cost of goods sold is 80.80% of net sales revenue
B) A sales return of 9.10%
C) An increase of 19.80% in net sales revenue
D) Accounts receivable turnover of 8.12 times
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
46) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $51,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $41,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $49,000 | $35,000 |
Retained earnings | $75,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $71,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $54,500 | $35,000 |
What would a horizontal analysis report with respect to common stock show?
A) An increase of 19.00% in sales revenue
B) Increase of $14,000 in common stock
C) An increase of 28.03% from prior to current year
D) Sales return of 9.16%
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
47) The Hunt Corporation data for the current year and prior year is as follows:
Account | Current year | Prior year |
Current assets | $54,240 | $42,000 |
A/R | $73,800 | $60,000 |
Mdse. Inventory | $67,500 | $50,000 |
Current liabilities | $44,400 | $30,000 |
Long-term liabilities | $26,600 | $28,000 |
Common stock (5,000 shares) | $41,000 | $35,000 |
Retained earnings | $83,540 | $59,000 |
Net sales revenue | $595,000 | $500,000 |
COGS | $480,000 | $400,000 |
Gross Profit | $115,000 | $100,000 |
Selling/General expenses | $44,000 | $50,000 |
Net income before taxes | $71,000 | $50,000 |
Income tax expense | $16,500 | $15,000 |
Net Income | $54,500 | $35,000 |
What would a horizontal analysis report with respect to current assets show?
A) Inventory turnover of 8.85 times
B) Current ratio of 4.40.
C) A 28.64% increase in current assets
D) Current assets are 100.00% of total assets.
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
48) Use the following information to do a horizontal analysis of Walston Corporation's balance sheet for the end of the current and prior years. Fill in the table.
Account | Current | Prior | Dollar Change | % Change |
Current assets | $126,000 | $90,000 | ||
Accounts receivable | $99,000 | $110,000 | ||
Merchandise inventory | $69,285 | $74,500 | ||
Current liabilities | $42,000 | $37,500 | ||
Long-term liabilities | $63,000 | $60,000 | ||
Common stock | $44,440 | $44,000 | ||
Retained earnings | $144,845 | $133,000 |
Account | Current | Prior | Dollar Change | % Change |
Current assets | $126,000 | $90,000 | $36,00 0 | 40.00% |
Accounts receivable | $99,000 | $110,000 | $(11,000) | -10.00% |
Merchandise inventory | $69,285 | $74,500 | $(5,215) | -7.00% |
Total assets | $294,285 | $274,500 | $19,785 | 7.21% |
Current liabilities | $42,000 | $37,500 | $4,500 | 12.00% |
Long-term liabilities | $63,000 | $60,000 | $3,000 | 5.00% |
Common stock | $44,440 | $44,000 | $440 | 1.00% |
Retained earnings | $144,845 | $133,000 | $11,845 | 8.91% |
Total liabilities and stockholders' equity | $294,285 | $274,500 | $19,785 | 7.21% |
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
49) Use the following information to do a horizontal analysis of Miller Corporation's income statement for the current year and prior year:
Account | Current | Prior |
Cost of goods sold | $347,700 | $305,000 |
Selling/general expenses | $40,320 | $32,000 |
Gross profit | $94,080 | $84,000 |
Net income | $12,840 | $12,000 |
Account | Current | Prior | Change in Dollars | % Change |
Cost of goods sold | $347,700 | $305,000 | $42,700 | 14.00% |
Selling/general expenses | $40,320 | $32,000 | $8,320 | 26.00% |
Gross profit | $94,080 | $84,000 | $10,080 | 12.00% |
Net income | $12,840 | $12,000 | $840 | 7.00% |
Diff: 2
LO: 14-1
EOC: E14-12A; E14-23B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14.2 Perform a vertical analysis of financial statements
1) Net income is used as the base for vertical analysis percentages on the income statement.
Diff: 1
LO: 14-2
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
2) Trend percentages are not a form of vertical analysis.
Diff: 1
LO: 14-2
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
3) Vertical analysis is the analysis of a financial statement that reveals the relationship of each statement item to a specified base.
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
4) The formula used in vertical analysis of the balance sheet is: (each balance sheet line item/total assets) = vertical %.
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
5) In a vertical analysis of an income statement, sales revenue is assigned a percentage of 100.
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
6) In a vertical analysis of a balance sheet, total liabilities are assigned a percentage of 100.
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
7) Trend analysis is the same thing as a vertical analysis.
Diff: 1
LO: 14-2
EOC: S14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
8) Sales revenue is used as the base for vertical analysis percentages on the income statement.
Diff: 1
LO: 14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
9) The formula used in vertical analysis of the balance sheet is: (each balance sheet line item/total liabilities) = vertical %.
Diff: 1
LO: 14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
10) The formula used in vertical analysis of the income statement is: (each income statement line item/sales revenue) = vertical %.
Diff: 1
LO: 14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
11) In a vertical analysis of a balance sheet, total assets are assigned a percentage of 100.
Diff: 1
LO: 14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
12) In a vertical analysis of an income statement, gross profit is assigned a percentage of 100.
Diff: 1
LO: 14-2
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
13) In vertical analysis, the base used for comparison on the balance sheet is
A) total stockholders' equity.
B) total liabilities.
C) total assets.
D) total retained earning.
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14) Which of the following terms is defined as an analysis of a financial statement that reveals the relationship of each statement item to a specific base?
A) Benchmarking
B) Horizontal analysis
C) Vertical analysis
D) Capital analysis
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
15) In performing a vertical analysis of an income statement, which of the following is generally used as the base amount?
A) Net sales
B) Total expenses
C) Gross sales
D) Gross profit
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
16) In performing a vertical analysis of a balance sheet, which of the following is generally used as the base amount?
A) Total liabilities
B) Net assets
C) Total assets
D) Total stockholders' equity
Diff: 1
LO: 14-2
EOC: S14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
17) Walker Corporation prepared a vertical analysis of its income statement and the following excerpt is available:
Sales $1,100,000
Cost of Goods Sold $690,400
Gross Profit $409,600
What is the Cost of Goods Sold percentage as found on a vertical analysis income statement?
A) 62.76%
B) 37.24%
C) 100%
D) 1.59%
Diff: 2
LO: 14-2
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
18) Walker Corporation prepared a vertical analysis of its income statement and the following excerpt is available:
Sales $1,200,000
Cost of Goods Sold $697,400
Gross Profit $502,600
What is the Sales percentage as found on a vertical analysis income statement?
A) 58.12%
B) 41.88%
C) 100%
D) 1.72%
Diff: 2
LO: 14-2
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
19) Walker Corporation prepared a vertical analysis of its income statement and the following excerpt is available:
Sales $1,500,000 100%
Cost of Goods Sold ???? 27.00%
Gross Profit ????
What is the Gross Profit for the year based on the information provided from the vertical analysis?
A) $1,095,000
B) $405,000
C) $1,230,000
D) Cannot determine from the information given
Diff: 2
LO: 14-2
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
20) Walker Corporation prepared a vertical analysis of its income statement and the following excerpt is available:
Sales $1,100,000 100%
Cost of Goods Sold ???? 23.00%
Gross Profit ????
What is the Cost of Goods Sold for the year based on the information provided from the vertical analysis?
A) $847,000
B) $253,000
C) $870,000
D) Cannot determine from the information given
Diff: 2
LO: 14-2
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
21) Lassiter Company reported the following information for the current year and prior year:
Account | Current year | Percentage | Prior year |
Net sales revenue | $369,200 | 100% | $300,000 |
COGS | $222,320 | ? | $240,000 |
Gross Profit | $146,880 | 39.78% | $60,000 |
Selling/General Exp. | $69,768 | 18.90% | $12,000 |
Net income before tax | $77,112 | ? | $48,000 |
Income Tax | $8,344 | ? | $3,000 |
Net Income | $68,768 | ? | $45,000 |
What would a vertical analysis report with respect to current year net income before income tax and income tax expense?
A) An increase of $20,768 from prior to current year
B) An increase of both net income before income tax and income tax of 20.89%
C) A decrease of $20,768 in net income before tax
D) Net income before tax of 20.89% and income tax of 2.26% of net sales revenue
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
22) Lassiter Company reported the following information for the current year and prior year:
Account | Current year | Percentage | Prior year |
Net sales revenue | $365,000 | 100% | $300,000 |
COGS | $228,200 | ? | $240,000 |
Gross Profit | $136,800 | 37.48% | $60,000 |
Selling/General Exp. | $64,800 | 17.75% | $12,000 |
Net income before tax | $72,000 | ? | $48,000 |
Income Tax | $3,600 | 0.99% | $3,000 |
Net Income | $68,400 | ? | $45,000 |
With respect to current year net sales revenue, what would a vertical analysis report?
A) COGS would be 62.52% of net sales revenue
B) A dividend yield of $18.74
C) A decrease of 21.67% in net sales revenue
D) Net sales revenue would be the base amount
Diff: 1
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
23) Lassiter Company reported the following information for the current year and prior year:
Account | Current year | Percentage | Prior year |
Net sales revenue | $367,200 | 100% | $300,000 |
COGS | $220,320 | ? | $240,000 |
Gross Profit | $146,880 | 40.00% | $60,000 |
Selling/General Exp. | $80,768 | 22.00% | $12,000 |
Net income before tax | $66,112 | ? | $48,000 |
Income Tax | $7,344 | 2.00% | $3,000 |
Net Income | $58,768 | ? | $45,000 |
What would a vertical analysis report with respect to current year selling and general expenses?
A) An increase of $68,768
B) 22.00% of net sales revenue
C) A decrease of 22.00%
D) 18.00% of net sales revenue
Diff: 1
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
24) Lassiter Company reported the following information for the current year and prior year:
Account | Current year | Percentage | Prior year |
Net sales revenue | $367,200 | 100% | $300,000 |
COGS | $214,320 | ? | $240,000 |
Gross Profit | $152,880 | 41.63% | $60,000 |
Selling/General Exp. | $69,768 | 19.00% | $12,000 |
Net income before tax | $83,112 | ? | $48,000 |
Income Tax | $7,344 | 2.00% | $3,000 |
Net Income | $75,768 | ? | $45,000 |
What would a vertical analysis report with respect to the relationship between current year net sales revenue and COGS?
A) COGS was 58.37% of net sales revenue
B) A 10.70% decrease from prior to current year
C) An increase of $25,680 from prior to current year
D) An increase of $152,880 from prior to current year
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
25) Lassiter Company reported the following information for the current year and prior year:
Account | Current year | Percentage | Prior year |
Net sales revenue | $367,200 | 100% | $300,000 |
COGS | $220,320 | ? | $240,000 |
Gross Profit | $146,880 | 40.00% | $60,000 |
Selling/General Exp. | $69,768 | 19.00% | $12,000 |
Net income before tax | $77,112 | ? | $48,000 |
Income Tax | $7,244 | 1.97% | $3,000 |
Net Income | $69,868 | ? | $45,000 |
What would a vertical analysis report with respect to current year income tax expense?
A) A decrease of $4,244
B) A decrease of 141.47% from prior to current year
C) Income tax expense is 1.97% of net sales revenue
D) A decrease of $24,868
Diff: 1
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
26) To follow is selected information about the Zebulon Mattress Company for the current year and prior year.
Account | Current | Prior |
Net sales revenue | $653,000 | $595,000 |
Cost of goods sold | $419,720 | $425,000 |
Gross profit | $233,280 | $170,000 |
Selling/general expenses | $149,040 | $93,500 |
Net income before tax | $84,240 | $76,500 |
Income tax | $25,920 | $22,800 |
Net income | $58,320 | $53,700 |
What is the current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year)?
A) 35.72%
B) 64.28%
C) -2.42%
D) 8.93%
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
27) To follow is selected information about the Zebulon Mattress Company for the current year and prior year.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $414,720 | $425,000 |
Gross profit | $233,280 | $170,000 |
Selling/general expenses | $149,640 | $93,500 |
Net income before tax | $83,640 | $76,500 |
Income tax | $25,920 | $22,800 |
Net income | $57,720 | $53,700 |
What is the current year's selling and general expenses percentage (as would be found on a vertical analysis of the income statement for the current year)?
A) 8.91%
B) 64.15%
C) 6.00%
D) 23.09%
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
28) To follow is selected information about the Zebulon Mattress Company for the current year and prior year.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $414,720 | $425,000 |
Gross profit | $233,280 | $170,000 |
Selling/general expenses | $149,040 | $93,500 |
Net income before tax | $84,240 | $76,500 |
Income tax | $25,920 | $22,800 |
Net income | $58,320 | $53,700 |
What is the current year's income tax percentage (as would be found on a vertical analysis of the income statement for the current year)?
A) 4.00%
B) 9.00%
C) 25.00%
D) 13.68%
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
29) To follow is selected information about the Zebulon Mattress Company for the current year and prior year.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $414,720 | $425,000 |
Gross profit | $233,280 | $170,000 |
Selling/general expenses | $149,040 | $93,500 |
Net income before tax | $84,240 | $76,500 |
Income tax | $25,020 | $22,800 |
Net income | $59,220 | $53,700 |
What is the current year's net income percentage (as would be found on a vertical analysis of the income statement for the current year)?
A) 10.28%
B) 70.30%
C) 9.14%
D) 236.69%
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
30) Selected information about the Ritter Company for the current year and prior year is given below.
Account | Current | Prior |
Net sales revenue | $653,000 | $595,000 |
Cost of goods sold | $406,760 | $425,000 |
Gross profit | $246,240 | $170,000 |
Selling/general expenses | $142,560 | $93,500 |
Net income before tax | $103,680 | $76,500 |
Income tax | $32,400 | $22,800 |
Net income | $71,280 | $53,700 |
The current year's cost of goods sold percentage (as would be found on a vertical analysis of the income statement for the current year) is
A) 4.29%
B) 37.71%
C) 10.92%
D) 62.29%
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
31) Selected information about the Ritter Company for the current year and prior year is given below.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $401,760 | $425,000 |
Gross profit | $246,240 | $170,000 |
Selling/general expenses | $159,560 | $93,500 |
Net income before tax | $86,680 | $76,500 |
Income tax | $32,400 | $22,800 |
Net income | $54,280 | $53,700 |
The current year's selling and general expenses percentage (as would be found on a vertical analysis of the income statement for the current year) is
A) 24.62%.
B) 13.38%.
C) 154.32%.
D) 8.38%.
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
32) Selected information about the Ritter Company for the current year and prior year is given below.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $401,760 | $425,000 |
Gross profit | $246,240 | $170,000 |
Selling/general expenses | $142,560 | $93,500 |
Net income before tax | $103,680 | $76,500 |
Income tax | $27,400 | $22,800 |
Net income | $76,280 | $53,700 |
The current year's income tax percentage (as would be found on a vertical analysis of the income statement for the current year) is
A) 278.39%.
B) 35.92%.
C) 4.23%.
D) 11.13%.
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
33) Selected information about the Ritter Company for the current year and prior year is given below.
Account | Current | Prior |
Net sales revenue | $648,000 | $595,000 |
Cost of goods sold | $401,760 | $425,000 |
Gross profit | $246,240 | $170,000 |
Selling/general expenses | $142,560 | $93,500 |
Net income before tax | $103,680 | $76,500 |
Income tax | $29,400 | $22,800 |
Net income | $74,280 | $53,700 |
The current year's net income percentage (as would be found on a vertical analysis of the income statement for the current year) is
A) 11.46%.
B) 4.54%.
C) 11.94%.
D) 4.94%.
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
34) Use the following information about the Mangum Corporation to do a vertical analysis of the income statement for the current year. Fill in the missing components in the table.
Account | Current | Prior | Percent |
Net sales revenue | $350,000 | $312,000 | |
Cost of goods sold | $192,500 | $215,000 | |
Gross profit | $157,500 | $97,000 | |
Selling/general expenses | $84,000 | $36,500 | |
Net income before tax | $73,500 | $60,500 | |
Income tax | $14,000 | $6,400 | |
Net income | $59,500 | $54,100 |
Account | Current | Prior | Percentage (Divide each current item by sales from current year) |
Net sales revenue | $350,000 | $312,000 | 100.00% |
Cost of goods sold | $192,500 | $215,000 | 55.00% |
Gross profit | $157,500 | $97,000 | 45.00% |
Selling/general expenses | $84,000 | $36,500 | 24.00% |
Net income before tax | $73,500 | $60,500 | 21.00% |
Income tax | $14,000 | $6,400 | 4.00% |
Net income | $59,500 | $54,100 | 17.00% |
Diff: 2
LO: 14-2
EOC: E14-14A; E14-25B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14.3 Prepare and use common-size financial statements
1) The data provided by the horizontal or vertical analysis of the financial statements can be used in benchmarking.
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
2) A common size statement reports only percentages.
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
3) A common size statement reports only dollar values.
Diff: 1
LO: 14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
4) The common size statement percentages are different from those that appear in horizontal analysis.
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
5) The common size statement percentages are different from those that appear in vertical analysis.
Diff: 1
LO: 14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
6) Common size statements allow the comparison of two or more companies with different amounts of net sales and net assets.
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
7) Benchmarking is a valid analysis measure of performance.
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
8) Horizontal analysis allows the comparison of companies with different amounts of net sales and net assets.
Diff: 1
LO: 14-3
EOC: S14-1
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
9) Common-size statements allow the comparison of companies with different amounts of net sales and net assets.
Diff: 1
LO: 14-3
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
10) Comparing the horizontal analysis of McDonald's financial statements to the horizontal analysis of Burger King's financial statements in percentages of increase or decrease from 2010 to 2011 would be
A) vertical analysis.
B) benchmarking.
C) ratio analysis.
D) horizontal analysis.
Diff: 2
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
11) An example of ________ would include an analysis of a table that includes a balance sheet with dollars and percentages of each item for a company and for the industry.
A) horizontal analysis
B) ratio analysis
C) vertical analysis
D) benchmarking
Diff: 2
LO: 14-3
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
12) A table that lists items of a balance sheet in dollars and percentages for two companies would be
A) used for vertical analysis.
B) a common-size balance sheet.
C) used for benchmarking.
D) used for horizontal analysis.
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
13) Presented are the income statements of Clyton and Garner heavy equipment manufacturing companies for the current year:
Clyton | Garner | |||
Net sales revenue | $487,000 | 100.00% | $500,000 | 100.00% |
COGS | 400,300 | 82.20% | 395,000 | 79.00% |
Gross Profit | 86,700 | 17.80% | 105,000 | 21.00% |
Selling/Gen Expenses | 20,200 | 4.15% | 50,000 | 10.00% |
Income from operations | 66,500 | 13.66% | 55,000 | 11.00% |
Income tax expense | 17,100 | 3.51% | 16,500 | 3.30% |
Net Income | $49,400 | 10.14% | $38,500 | 7.70% |
Which company has the better relationship percentage-wise between selling and general expenses compared to net sales revenue?
A) Impossible to determine
B) Both have the same relationship.
C) Clyton
D) Garner
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14) Presented are the income statements of Nautidog and Oak Distillery companies for the current year:
Nautidog | Oak | |||
Net sales revenue | $487,000 | 100.00% | $500,000 | 100.00% |
COGS | 400,200 | 82.18% | 395,000 | 79.00% |
Gross Profit | 86,800 | 17.82% | 105,000 | 21.00% |
Selling/Gen Expenses | 20,100 | 4.13% | 50,000 | 10.00% |
Income from operations | 66,700 | 13.70% | 55,000 | 11.00% |
Income tax expense | 17,100 | 3.51% | 16,500 | 3.30% |
Net Income | $49,600 | 10.18% | $38,500 | 7.70% |
Which company has the better relationship between gross profit and net sales revenue?
A) Impossible to determine
B) Both have the same relationship.
C) Nautidog
D) Oak
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
15) Presented are the income statements of Wilson Factory and Sims Factory for the current year:
Wilson | Sims | |||
Net sales revenue | $487,000 | 100.00% | $500,000 | 100.00% |
COGS | 300,700 | 61.75% | 395,000 | 79.00% |
Gross Profit | 186,300 | 38.25% | 105,000 | 21.00% |
Selling/Gen Expenses | 20,600 | 4.23% | 50,000 | 10.00% |
Income from operations | 165,700 | 34.02% | 55,000 | 11.00% |
Income tax expense | 17,100 | 3.51% | 16,500 | 3.30% |
Net Income | $148,600 | 30.51% | $38,500 | 7.70% |
Which company has the better relationship between net income and net sales revenue?
A) Impossible to determine
B) Both have the same relationship.
C) Wilson
D) Sims
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
16) Presented are the income statements of Big Cat and Little Cat heavy equipment manufacturers for the current year:
Big Cat | Little Cat | |||
Net sales revenue | $487,000 | 100.00% | $500,000 | 100.00% |
COGS | 300,300 | 61.66% | 395,000 | 79.00% |
Gross Profit | 186,700 | 38.34% | 105,000 | 21.00% |
Selling/Gen Expenses | 20,200 | 4.15% | 50,000 | 10.00% |
Income from operations | 166,500 | 34.19% | 55,000 | 11.00% |
Income tax expense | 17,100 | 3.51% | 16,500 | 3.30% |
Net Income | $149,400 | 30.68% | $38,500 | 7.70% |
Which company has the best inventory turnover rate?
A) Both have the same rate.
B) Impossible to determine
C) Little Cat
D) Big Cat
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
17) Presented are the income statements of Wooster and Ashland Publications companies for the current year:
Wooster | Ashland | |||
Net sales revenue | $487,000 | 100.00% | $500,000 | 100.00% |
COGS | 400,000 | 82.14% | 427,000 | 85.40% |
Gross Profit | 87,000 | 17.86% | 73,000 | 14.6% |
Selling/Gen Expenses | 30,000 | 6.16% | 52,000 | 10.40% |
Income from operations | 57,000 | 11.70% | 21,000 | 4.20% |
Income tax expense | 17,100 | 3.51% | 18,500 | 3.70% |
Net Income | $39,900 | 8.19% | $4,500 | 0.90% |
What should Ashland do to improve its performance to match or to exceed Wooster's performance?
A) Reduce percentage of COGS
B) Reduce percentage of income tax expense
C) Reduce percentage of selling/general expenses
D) Any of the above would be useful to improve performance.
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
18) Common-sized financial statements are included in which type of analysis?
A) Vertical analysis
B) Trend analysis
C) Ratio analysis
D) Horizontal analysis
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
19) The practice of comparing one company's performance to another's can be accomplished using
A) ratio analysis.
B) trend analysis.
C) benchmarking.
D) all of the above
Diff: 2
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
20) The ________ balance sheets display only percentages.
A) comparative
B) account form
C) report form
D) common-size
Diff: 1
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
21) In comparing companies of different sizes, which of the following is most helpful?
A) Ratio analysis
B) Using common-sized statements
C) Neither ratio analysis nor common-sized statements
D) Both ratio analysis and using common-sized statements
Diff: 1
LO: 14-3
EOC: E14-15A; E14-26B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
22) The managerial accountant at the Selma Manufacturing presented the following information at a meeting:
Selma Manufacturing
Income Statement: Vertical Analysis
Company A | Company B | |
Sales revenues | 100% | 100% |
Less: Cost of goods sold | 23% | 21% |
Gross profit | 77% | 79% |
Less: Operating expenses | 16% | 24% |
Operating income | 61% | 55% |
Less: Interest expense | 3% | 4% |
Income before income taxes | 58% | 51% |
Less: Income tax expense | 3% | 4% |
Net income | 55% | 47% |
What type of statement did the managerial accountant present at the meeting?
A) Balance sheet
B) Statement of cash flows
C) Horizontal analysis
D) Common-size statement
Diff: 1
LO: 14-3
EOC: S14-4
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
23) The managerial accountant at the Selma Manufacturing presented the following information at a meeting:
Selma Manufacturing
Income Statement: Vertical Analysis
Company A | Company B | |
Sales revenues | 100% | 100% |
Less: Cost of goods sold | 23% | 21% |
Gross profit | 77% | 79% |
Less: Operating expenses | 16% | 24% |
Operating income | 61% | 55% |
Less: Interest expense | 3% | 4% |
Income before income taxes | 58% | 51% |
Less: Income tax expense | 3% | 4% |
Net income | 55% | 47% |
Which company is more profitable based on this common-size statement?
A) Company A
B) Company B
C) Company A and B are equally profitable.
D) Cannot determine from information given
Diff: 2
LO: 14-3
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
24) The managerial accountant at the Selma Manufacturing presented the following information at a meeting:
Selma Manufacturing
Income Statement: Vertical Analysis
Company A | Company B | |
Sales revenues | 100% | 100% |
Less: Cost of goods sold | 23% | 21% |
Gross profit | 77% | 79% |
Less: Operating expenses | 16% | 24% |
Operating income | 61% | 55% |
Less: Interest expense | 3% | 4% |
Income before income taxes | 58% | 51% |
Less: Income tax expense | 3% | 4% |
Net income | 55% | 47% |
Which company earns more gross profit for each dollar of sales revenue based on this common-size statement?
A) Company A
B) Company B
C) Company A and B are equal in this aspect.
D) Cannot determine from information given
Diff: 2
LO: 14-3
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
25) The managerial accountant at Company A, a small retailer, reviews information about Company B, a large national firm. Review the following information listed below about Company A and Company B:
Company A
Income Statement: Vertical Analysis
Company A | Company B | |
Sales revenues | 100% | 100% |
Less: Cost of goods sold | 62.40% | 71.20% |
Gross profit | 37.60% | 28.80% |
Less: Operating expenses | 18.20% | 16.10% |
Operating income | 19.40% | 12.70% |
Less: Interest expense | 1.98% | 1.60% |
Income before income taxes | 17.42% | 11.10% |
Less: Income tax expense | 3.40% | 2.98% |
Net income | 14.02% | 8.12% |
Why does the managerial accountant at Company A review the income statement at Company B? What is the name of this statement? Which company is most profitable? Why?
Diff: 2
LO: 14-3
EOC: S14-4
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14.4 Compute the standard financial ratios
1) Managers use a variety of financial ratios to evaluate a company's performance.
Diff: 1
LO: 14-4
EOC: S14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
2) Working capital is current assets minus current liabilities.
Diff: 1
LO: 14-4
EOC: S14-5
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
3) The current ratio is the most widely used ratio to measure a company's ability to pay current liabilities.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
4) The acid test ratio is a tighter measure of a company's ability to pay current liabilities than the current ratio.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
5) The inventory turnover ratio indicates how rapidly inventory is sold.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
6) The A/R turnover ratio is the ratio of net credit sales to average net accounts receivable.
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
7) Days' sales in receivables is a measure of a company's ability to collect their accounts receivable.
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
8) Rate of return on net sales is a measure of a company's profitability.
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
9) Rate of return on total assets is: (net income plus interest expense) divided by average total assets.
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
10) Working capital is a measure of a company's ability to pay its current obligations.
Diff: 1
LO: 14-4
EOC: S14-5
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
11) The times-interest-earned ratio is a measure of ability to cover debt.
Diff: 1
LO: 14-4
EOC: E14-17A; E14-28B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
12) The inventory turnover ratio is the ratio of cost of goods sold to average inventory.
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
13) Working capital is current assets divided by current liabilities.
Diff: 1
LO: 14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14) Which of the following is considered a strong current ratio?
A) 0.3
B) 0.8
C) -1.0
D) 2.1
Diff: 1
LO: 14-4
EOC: S14-5
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
15) The ________ ratio measures the ability of a company to pay all current liabilities if they came due immediately.
A) inventory turnover
B) current
C) day's sales in receivables
D) acid-test
Diff: 1
LO: 14-4
EOC: S14-11
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
16) The ability of a company to collect receivables is measured by which ratio?
A) Inventory turnover ratio
B) Day's sales in receivables
C) Current ratio
D) Acid-test ratio
Diff: 1
LO: 14-4
EOC: S14-6
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
17) A company's ability to pay liabilities with current assets is measured by which of the following ratios?
A) Inventory turnover ratio
B) Day's sales in receivables
C) Acid-test ratio
D) Current ratio
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
18) The ability of a company to sell inventory is measured by which of the following ratios?
A) Acid-test ratio
B) Inventory turnover ratio
C) Current ratio
D) Day's sales in receivables
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
19) The formula to compute the current ratio is
A) (cash + short-term investments + net current liabilities)/current liabilities.
B) (current liabilities +short-term investments + net current receivables) divided by current assets.
C) current liabilities/current assets.
D) current assets/current liabilities.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
20) The formula to compute the acid-test ratio is
A) (cash + short-term investments + net current receivables)/current assets.
B) (cash + short-term investments + net current receivables)/current liabilities.
C) current liabilities/current assets.
D) currents assets/current liabilities.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
21) Which of the following is the formula to compute inventory turnover?
A) Net credit sales/average inventory
B) Average net accounts receivable/one day's sales
C) Net credit sales/average net accounts receivable
D) Cost of goods sold/average inventory
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
22) The formula to compute accounts receivable turnover is
A) net credit sales/average net accounts receivable.
B) net credit sales/average inventory.
C) cost of goods sold/average inventory.
D) average net accounts receivable/one day's sales.
Diff: 1
LO: 14-4
EOC: E14-17
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
23) Which of the following is the formula to compute days' sales in receivable?
A) Cost of goods sold/average inventory
B) Net credit sales/average inventory
C) Net credit sales/average net accounts receivable
D) Average net accounts receivable/one day's sales
Diff: 1
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
24) The formula to compute the debt ratio is
A) interest expense/income from operations.
B) total liabilities/total assets.
C) income from operations/interest expense.
D) total assets/total liabilities.
Diff: 1
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
25) Which of the following is the formula to compute times-interest-earned?
A) Total liabilities/total assets
B) Interest expense/income from operations
C) Income from operations/interest expense
D) Total assets/total liabilities
Diff: 1
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
26) The formula to compute the rate of return on net sales is
A) net income/net sales.
B) net income/average common stockholder's equity.
C) net income + interest expense, then divide by average total assets.
D) net income/interest expense.
Diff: 1
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
27) Which of the following is the formula for computing the price-earnings ratio?
A) Market price per share of common stock/ earnings per share
B) Annual dividend per share of common stock/ market price per share
C) (Net income- preferred dividends)/ number of shares of outstanding common stock
D) Total stockholder's equity/ number of shares of outstanding common stock
Diff: 1
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
28) The formula for computing earnings per share of common stock is
A) (net income + interest expense) / average total assets.
B) net income/net sales.
C) (net income - preferred dividends) / average common stockholders' equity.
D) (net income - preferred dividends) / number of shares of outstanding common stock.
Diff: 1
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
29) The formula for computing the rate of return on common stockholders' equity is
A) (net income + interest expense) / average total assets.
B) (net income - preferred dividends) / average common stockholders' equity.
C) net income / net sales.
D) (net income - preferred dividends) / number of shares of outstanding common stock.
Diff: 1
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
30) Which of the following is the formula for computing the rate of return on total assets?
A) (Net income - preferred dividends)/number of shares of outstanding common stock
B) Net income/net sales
C) (Net income + interest expense)/average total assets
D) (Net income - preferred dividends)/average common stockholders' equity
Diff: 1
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
31) The formula for computing the dividend yield is
A) annual dividend per share of common stock/market price per share of common stock.
B) market price per share of common stock/earnings per share.
C) total stockholders' equity/number of shares of outstanding common stock.
D) (net income - preferred dividends)/number of shares of outstanding common stock.
Diff: 1
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
32) Earning more income on borrowed money than on the related interest expense is an example of
A) trading on assets.
B) trading on equity.
C) trading on liabilities.
D) trading on expenses.
Diff: 1
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
33) The formula for computing book value per share of common stock is
A) market price per share of common stock/earning per share.
B) annual dividend per share of common stock/market price per share of common stock.
C) (net income - preferred dividends)/number of shares of common stock outstanding.
D) (total stockholders' equity - preferred equity)/number of shares of common stock outstanding.
Diff: 1
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
34) All of the following measure a company's ability to pay current liabilities except
A) Accounts Receivable Turnover.
B) Current Ratio.
C) Working Capital.
D) Acid-Test Ratio.
Diff: 1
LO: 14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
35) All of the following measure a company's profitability except
A) Gross Profit Percentage.
B) Rate of Return on Net Sales.
C) Operating Income Percentage.
D) Acid-Test Ratio.
Diff: 1
LO: 14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
36) All of the following are red flags that a company is in financial trouble except
A) Buildup of inventories.
B) A current ratio close to 2.0.
C) Too much debt.
D) Decreased cash flow.
Diff: 1
LO: 14-4
AACSB: Reflective thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
37) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,620,000 | |
Cost of goods sold | $1,125,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $117,000 | $82,000 |
Long-term assets | $508,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $61,000 | $52,000 |
Long-term liabilities | $271,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the debt ratio for the current year?
A) 1.87
B) 0.53
C) 1.92
D) 0.52
Diff: 2
LO: 14-4
EOC: E14-17A; E14-28B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
38) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the current ratio for the current year?
A) 0.21
B) 0.59
C) 1.98
D) 0.50
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
39) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | 52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the acid-test ratio for the current year?
A) 0.59
B) 1.53
C) 10.80
D) 1.46
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
40) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,620,000 | |
Cost of goods sold | $1,125,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $47,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the inventory turnover for the current year?
A) 1.44 times
B) 34.29 times
C) 23.81 times
D) 0.04 times
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
41) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $283,700 | |
Interest expense | $42,000 | |
Net Income | $169,300 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the rate of return on total assets for the current year?
A) 59.43%
B) 36.84%
C) 22.07%
D) 20.73%
Diff: 2
LO: 14-4
EOC: S14-8
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
42) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,320,000 | |
Cost of goods sold | $825,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $114,000 | $82,000 |
Long-term assets | $511,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $58,000 | $52,000 |
Long-term liabilities | $274,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the rate of return on net sales for the current year?
A) 0.21
B) 0.28
C) 0.13
D) 7.63
Diff: 2
LO: 14-4
EOC: S14-8
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
43) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $46,000 | |
Net Income | $169,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the times-interest-earned ratio for the current year?
A) 1.90 times
B) 1.00 times
C) 4.67 times
D) 0.21 times
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
44) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,320,000 | |
Cost of goods sold | $825,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $114,000 | $82,000 |
Long-term assets | $511,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $58,000 | $52,000 |
Long-term liabilities | $274,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $48,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the days' sales in receivables for the current year?
A) 27.50 days
B) 2.38 days
C) 1.21 days
D) 13.27 days
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
45) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,620,000 | |
Cost of goods sold | $1,125,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $64,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the accounts receivable turnover for the current year?
A) 25.31 times
B) 0.04 times
C) 17.58 times
D) 2.70 times
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
46) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $43,000 | |
Net Income | $172,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $276,000 | $245,000 |
Common stockholders' equity | $292,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 35,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the rate of return on common stockholders' equity for the current year?
A) 62.32%
B) 76.44%
C) 66.54%
D) 150.29%
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
47) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 15,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $40.
What is the earnings per share for the current year?
A) $51.53
B) $11.53
C) $14.33
D) $40.00
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
48) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $44,000 | |
Net Income | $171,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 46,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $40.
What is the price-earnings ratio for the current year? (Round any intermediary calculations and your final answer to the nearest cent.)
A) 10.75
B) 3.72
C) 43.72
D) 40.00
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
49) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $275,000 | $245,000 |
Common stockholders' equity | $293,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 25,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $10.
What is the dividend yield for the current year? (Round any intermediary calculations and your final answer two decimal places, X.XX.)
A) 68.00%
B) 68.97%
C) 55.56%
D) 6.80%
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
50) The Wendell Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $1,220,000 | |
Cost of goods sold | $725,000 | |
Gross profit | $495,000 | |
Selling/general expenses | $280,000 | |
Interest expense | $42,000 | |
Net Income | $173,000 | |
Current assets | $113,000 | $82,000 |
Long-term assets | $512,000 | $440,000 |
Total assets | $625,000 | $522,000 |
Current liabilities | $57,000 | $52,000 |
Long-term liabilities | $277,000 | $245,000 |
Common stockholders' equity | $291,000 | $225,000 |
Total liabilities and stockholders' equity | $625,000 | $522,000 |
Inventory and prepaid expenses account for $30,000 of the current year's current assets.
Average inventory for the current year is $36,250.
Average net accounts receivable for the current year is $45,000.
There are 29,000 shares of common stock outstanding.
Total dividends paid during the current year were $17,000.
The market price per share of common stock is $20.
What is the book value per share of common stock on the last day of the current year?
A) $10.03
B) $21.55
C) $5.97
D) $42.07
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
51) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $25,000 | $14,000 |
Accounts receivable, net | $22,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $63,000 | $90,000 |
Total long-term liabilities | $19,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the acid-test ratio for the current year?
A) 0.40
B) 0.57
C) 0.75
D) 1.34
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
52) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $243,250 | $180,000 |
Cost of goods sold | $121,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the inventory turnover for the current year?
A) 2.42 times
B) 0.41 times
C) 5.59 times
D) 3.51 times
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
53) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $242,250 | $180,000 |
Cost of goods sold | $120,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is days' sales in receivables for the current year?
A) 153.42 days
B) 68.49 days
C) 42.19 days
D) 2.40 days
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
54) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $175,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $47,000 | $78,000 |
Common stock, no par, 1,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the book value per share of common stock for the current year?
A) $186.67
B) $71.33
C) $115.33
D) $258.00
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
55) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 500 shares, market value $106 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the price-earnings ratio for the current year?
A) 48.00
B) 1.33
C) 244.50
D) 2.21
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
56) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $5,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the rate of return on total assets for the current year?
A) 11.54%
B) 9.62%
C) 23.53%
D) 22.64%
Diff: 3
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
57) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $12,000 | $30,000 |
Interest expense | $1,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $22,000 | $14,000 |
Accounts receivable, net | $25,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the times-interest-earned ratio for the current year?
A) 237.25 times
B) 12.00 times
C) 122.25 times
D) 22.00 times
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
58) The following selected information relates to Eaglechase Company for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $237,250 | $180,000 |
Cost of goods sold | $115,000 | $110,000 |
Gross profit | $122,250 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $24,000 | $18,000 |
Cash | $24,000 | $14,000 |
Accounts receivable, net | $23,000 | $31,000 |
Inventory | $56,000 | $44,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $105,000 | $90,000 |
Total long-term assets | $150,000 | $175,000 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $133,000 | $57,000 |
What is the current ratio for the current year?
A) 1.00
B) 4.77
C) 1.75
D) 0.40
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
59) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $28,000 | $17,000 |
Accounts receivable, net | $23,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $63,000 | $90,000 |
Total long-term liabilities | $19,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The acid-test ratio for the current year is
A) 0.81.
B) 0.44.
C) 1.24.
D) 0.37.
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
60) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The inventory turnover for the current year is
A) 1.75 times.
B) 0.40 times.
C) 3.50 times.
D) 2.00 times.
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
61) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $221,000 | $180,000 |
Cost of goods sold | $127,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $30,000 | $35,000 |
Inventory | $61,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
Days' sales in receivables for the current year is closest to
A) 49.55 days.
B) 53.68 days.
C) 57.81 days.
D) 2.10 days.
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
62) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 1,000 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The book value per share of common stock for the current year is
A) $219.00.
B) $198.75.
C) $280.75.
D) $158.75.
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
63) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,300 shares, market value $126 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The price-earnings ratio for the current year is
A) 40.87.
B) 9.06.
C) 11.59.
D) 3.08.
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
64) The following selected information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,400 | $7,000 |
Net income | $40,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The rate of return on total assets for the current year is closest to
A) 13.30%
B) 15.10%
C) 3.44%
D) 14.58%
Diff: 3
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
65) The following information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $35,000 | $30,000 |
Interest expense | $17,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $25,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $118,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $60,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The times-interest-earned ratio for the current year is
A) 5.5 times.
B) 2.1 times.
C) 6.3 times.
D) 1.4 times.
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
66) The following information relates to Hodge Unlimited for the past two years.
Account | Current year | Prior year |
Net sales (all credit) | $219,000 | $180,000 |
Cost of goods sold | $125,000 | $110,000 |
Gross profit | $94,000 | $70,000 |
Income from operations | $32,000 | $30,000 |
Interest expense | $2,000 | $7,000 |
Net income | $25,000 | $18,000 |
Cash | $65,000 | $17,000 |
Accounts receivable, net | $26,000 | $35,000 |
Inventory | $65,000 | $60,000 |
Prepaid expenses | $2,000 | $1,000 |
Total current assets | $158,000 | $113,000 |
Total long-term assets | $162,750 | $187,751 |
Total current liabilities | $100,000 | $90,000 |
Total long-term liabilities | $22,000 | $78,000 |
Common stock, no par, 2,500 shares, market value $96 per share | $40,000 | $40,000 |
Retained earnings | $158,750 | $92,751 |
The current ratio for the current year is closest to
A) 2.43.
B) 1.32.
C) 1.56.
D) 1.58.
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
67) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $61,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $390,000 | $300,000 |
Current liabilities | $46,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $390,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the debt ratio for the current year?
A) 0.12
B) 0.22
C) 3.00
D) 0.33
Diff: 2
LO: 14-4
EOC: S14-7
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
68) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $101,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $430,000 | $300,000 |
Current liabilities | $86,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $430,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's current ratio for the current year?
A) 5.05
B) 1.17
C) 0.85
D) 0.19
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
69) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $61,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $390,000 | $300,000 |
Current liabilities | $46,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $390,000 | $300,000 |
Inventory and prepaid expenses account for $25,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's acid-test ratio for the current year?
A) 0.54
B) 1.28
C) 8.48
D) 0.78
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
70) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $9,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's inventory turnover for the current year?
A) 88.89 times
B) 56.00 times
C) 3.11 times
D) 44.44 times
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
71) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $805,000 | |
Cost of goods sold | $509,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $183,600 | |
Interest expense | $33,000 | |
Net income | $79,400 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's rate of return on total assets for the current year?
A) 22.69%
B) 32.11%
C) 28.10%
D) 13.26%
Diff: 2
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
72) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $802,000 | |
Cost of goods sold | $506,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $36,000 | |
Net income | $76,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's rate of return on net sales for the current year?
A) 9.48%
B) 4.49%
C) 63.09%
D) 7.11%
Diff: 2
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
73) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $804,000 | |
Cost of goods sold | $508,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $36,000 | |
Net income | $76,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's times-interest-earned ratio for the current year?
A) 0.47 times
B) 36.44 times
C) 3.11 times
D) 1.00 times
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
74) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $805,000 | |
Cost of goods sold | $509,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $52,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's days' sales in receivables for the current year?
A) 230.79 days
B) 27.20 days
C) 12.70 days
D) 23.58 days
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
75) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $62,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's accounts receivable turnover for the current year?
A) 0.08 times
B) 8.13 times
C) 1.59 times
D) 12.90 times
Diff: 2
LO: 14-4
EOC: E14-17
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
76) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $35,000 | |
Net income | $77,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $85,000 | $164,000 |
Common stockholders' equity | $259,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's rate of return on common stockholder's equity for the current year?
A) 15.46%
B) 40.63%
C) 4.62%
D) 29.73%
Diff: 2
LO: 14-4
EOC: E14-18A; E14-29B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
77) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $32,000 | |
Net income | $80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 30,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's earnings per share for the current year?
A) $26.67
B) $2.67
C) $8.67
D) $13.33
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
78) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $36,000 | |
Net income | $76,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 10,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $25.
What is the company's price-earnings ratio for the current year?
A) 7.60
B) 6.94
C) 3.29
D) 3.60
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
79) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $ 84,000 | $164,000 |
Common stockholders' equity | $260,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 50,000 shares of common stock outstanding.
Total dividends paid during the current year were $70,000.
The market price per share of common stock is $25.
What is the company's dividend yield for the current year?
A) 5.60%
B) 32.00%
C) 6.40%
D) 5.68%
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
80) The Johnson Corporation reported the following income statement and balance sheet amounts and additional information for the end of the current year.
End of current year | End of prior year | |
Net sales revenue (all credit) | $800,000 | |
Cost of goods sold | $504,000 | |
Gross profit | $296,000 | |
Selling/general expenses | $184,000 | |
Interest expense | $ 32,000 | |
Net income | $ 80,000 | |
Current assets | $ 71,000 | $20,000 |
Long-term assets | $329,000 | $280,000 |
Total assets | $400,000 | $300,000 |
Current liabilities | $ 56,000 | $16,000 |
Long-term liabilities | $86,000 | $164,000 |
Common stockholders' equity | $258,000 | $120,000 |
Total liabilities and stockholders' equity | $400,000 | $300,000 |
Inventory and prepaid expenses account for $28,000 of the current year's current assets.
Average inventory for the current year is $12,000.
Average net accounts receivable for the current year is $32,000.
There are 40,000 shares of common stock outstanding.
Total dividends paid during the current year were $60,000.
The market price per share of common stock is $45.
What is the company's book value per share of common stock on the last day of the current year?
A) $45.00
B) $6.45
C) $2.15
D) $2.00
Diff: 2
LO: 14-4
EOC: E14-19A; E14-30B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
81) The following information relates to Benson Corporation.
Account | Current year | Prior year |
Net sales (all credit) | $529,250 | $499,500 |
Cost of goods sold | $379,575 | $353,600 |
Gross profit | $149,675 | $145,900 |
Income from operations | $95,500 | $79,900 |
Interest expense | $23,500 | $19,500 |
Net income | $57,385 | $51,600 |
Cash | $26,000 | $15,900 |
Accounts receivable, net | $33,800 | $23,340 |
Inventory | $42,000 | $30,300 |
Prepaid expenses | $2,000 | $1,500 |
Total current assets | $103,800 | $72,040 |
Total long-term assets | $62,000 | $38,000 |
Total current liabilities | $46,000 | $41,600 |
Total long-term liabilities | $20,000 | $22,700 |
Common stock, no par, 4,990 shares, value $50/share | $30,000 | $30,000 |
Required:
a. What is the acid-test ratio for the current year?
b. What is the inventory turnover for the current year?
c. What is days' sales in receivables for the current year?
d. What is the book value per share of common stock for the current year?
e. What is the price-earnings ratio for the current year?
f. What is the rate of return on total assets for the current year?
g. What is the times-interest-earned ratio for the current year?
h. What is the current ratio for the current year?
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
82) The following information relates to Quarry Corporation.
Account | Current year | Prior year |
Net sales (all credit) | $520,125 | $499,500 |
Cost of goods sold | $375,960 | $353,600 |
Gross profit | $144,165 | $145,900 |
Income from operations | $95,500 | $79,900 |
Interest expense | $23,500 | $19,500 |
Net income | $57,600 | $51,600 |
Cash | $30,600 | $15,900 |
Accounts receivable, net | $33,800 | $23,200 |
Inventory | $42,000 | $30,300 |
Prepaid expenses | $2,000 | $1,500 |
Total current assets | $108,400 | $70,900 |
Total long-term assets | $62,000 | $38,000 |
Total current liabilities | $46,000 | $41,600 |
Total long-term liabilities | $20,000 | $22,700 |
Common stock, no par, 3,000 shares, value $50/share | $30,000 | $30,000 |
Required:
a. What is the acid-test ratio for the current year?
b. What is the inventory turnover for the current year?
c. What is days' sales in receivables for the current year?
d. What is the book value per share of common stock for the current year?
e. What is the price-earnings ratio for the current year?
f. What is the rate of return on total assets for the current year?
g. What is the times-interest-earned ratio for the current year?
h. What is the current ratio for the current year?
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
83) The following information relates to Parson Corporation.
Account | Current year | Prior year |
Net sales (all credit) | $445,400 | $362,000 |
Cost of goods sold | $220,000 | $185,000 |
Gross profit | $225,400 | $177,000 |
Income from operations | $72,000 | $80,000 |
Interest expense | $8,000 | $14,000 |
Net income | $40,000 | $35,000 |
Cash | $34,000 | $28,000 |
Accounts receivable, net | $42,000 | $62,000 |
Inventory | $120,000 | $100,000 |
Prepaid expenses | $4,000 | $2,000 |
Total current assets | $200,000 | $192,000 |
Total long-term assets | $200,000 | $230,000 |
Total current liabilities | $100,000 | $165,000 |
Total long-term liabilities | $44,000 | $95,000 |
Common stock, no par, 8,000 shares, value $120/share | $80,000 | $80,000 |
Required:
a. What is the acid-test ratio for the current year?
b. What is the inventory turnover for the current year?
c. What is days' sales in receivables for the current year?
d. What is the current ratio for the current year?
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
84) The following information relates to Hammond Corporation.
Account | Current year | Prior year |
Net sales (all credit) | $52,000 | $46,000 |
Cost of goods sold | $25,000 | $25,600 |
Gross profit | $27,000 | $20,400 |
Income from operations | $9,000 | $6,000 |
Interest expense | $1,000 | $7,000 |
Net income | $6,000 | $4,500 |
Cash | $4,000 | $3,500 |
Accounts receivable, net | $8,000 | $9,000 |
Inventory | $13,000 | $11,000 |
Prepaid expenses | $500 | $400 |
Total current assets | $25,500 | $23,900 |
Total long-term assets | $25,000 | $30,000 |
Total current liabilities | $15,000 | $22,500 |
Total long-term liabilities | $6,000 | $20,000 |
Common stock, no par, 2,500 shares, value $30/share | $10,000 | $10,000 |
Required:
a. What is the book value per share of common stock for the current year?
b. What is the price-earnings ratio for the current year?
c. What is the rate of return on total assets for the current year?
d. What is the times-interest-earned ratio for the current year?
Diff: 2
LO: 14-4
EOC: E14-20A; E14-31B
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
85) The managerial accountant at Saunders Company reported no preferred dividends paid in 2017 and 2018; and, there were 20,000 shares of outstanding stock at the end of 2017 and 2018. The managerial accountant reported that net income in 2018 was $95,000 and the value of common stock at the end of the year was $28.85 per share. The managerial accountant reported that net income in 2017 was $65,000 and the value of common stock at the end of the year was $12.95 per share.
Compute the earnings per share (EPS) at Saunders Company in 2017 and in 2018. Did the EPS increase or decrease in 2018? Should a managerial accountant strive to achieve an increase in EPS or a decrease in EPS? What can a decrease in EPS indicate?
Diff: 2
LO: 14-4
EOC: S14-9
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
86) The managerial accountant at the Holiday Wreath Shoppe is required to determine the relationship between net income and common stockholder's equity. The goal of the managerial accountant is to determine how much income is earned at the Holiday Wreath Shoppe for each $1 invested by the common shareholders. The managerial accountant reported that the rate of return on assets is 9.5%. The managerial accountant reported the following information:
Holiday Wreath Shoppe
Worksheet, 2014
Net income | $60,000 |
Preferred dividends | $0 |
Common stockholders' equity 2013 | $340,000 |
Common stockholders' equity 2014 | $375,000 |
Calculate the rate of return on common stockholder's equity in 2014. Discuss the difference in the rate of return on assets at the Wreath Factory compared to the rate of return on its rate of return on common stockholder's equity.
Diff: 2
LO: 14-4
EOC: S14-8
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
87) The managerial accountant at Gorman Company reported in 2018 its earnings per share were $6.20 and the market price per share of its common stock is $75. In 2017, the managerial accountant reported $3.10 earnings per share and the market price was $40 per share.
Compute the price/earnings ratio at Gorman Company and discuss why the managerial accountant is interested in the price/earnings ratio.
Diff: 2
LO: 14-4
EOC: S14-9
AACSB: Analytical thinking
Learning Outcome: Define and use the different types of financial statement analysis tools.
14.5 Analyze financial trends using data analytics tools
1) Sparklines are mini-graphs contained in one cell of Excel.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
2) A drawback of sparklines is that they take up a large amount of room on the Excel spreadsheet.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
3) Line charts are commonly used to visualize time series data.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
4) The difference between a line chart and a sparkline in Excel is that the sparkline provides a visualization of time series data.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
5) Which of the following is not a benefit of a sparkline?
A) They visualize one range of data without showing any scaled comparison between ranges of data.
B) They quickly provide trends relating to each row of data.
C) They don't take up much room on the spreadsheet.
D) They can be formatted as line charts, column charts, or win/loss charts.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
6) Which tab on the ribbon contains the option for creating Sparklines in Excel?
A) Formulas
B) Insert
C) Data
D) Page Layout
Diff: 1
LO: 14-5
AACSB: Reflective thinking
7) In Excel, Line Charts can be created by going to what tab on the ribbon?
A) Formulas
B) Data
C) Insert
D) Review
Diff: 1
LO: 14-5
AACSB: Reflective thinking
8) Which of the following is not a step taken in creating Line Charts in Excel?
A) Select all data you would like to include in the graph.
B) Click on Line Chart style under the Sparkline icon.
C) Choose the Insert tab on the ribbon.
D) Choose the Line chart from the chart options.
Diff: 1
LO: 14-5
AACSB: Reflective thinking
9) Describe the steps taken in creating a Sparkline in Excel.
Diff: 2
LO: 14-5
AACSB: Reflective thinking
10) In order to create a Line Chart in Excel, what steps are taken?
Diff: 2
LO: 14-5
AACSB: Reflective thinking
Document Information
Connected Book
MCQ Test Bank | Managerial Accounting - 6th Edition by Braun and Tietz
By Karen W. Braun, Wendy M Tietz