Financial statement analysis lessens the need for expert judgment.
The comparison of a company’s financial condition and performance to a base amount is known as:
How long a company holds inventory before selling it can be measured by dividing cost of goods sold by the average inventory balance to determine the:
Price earnings ratio.
Accounts receivable turnover.
Days’ sales uncollected.
The building blocks of financial statement analysis include (1) liquidity, (2) salability, (3) solvency, and (4) profitability.
The market price of Horokhiv Corporation’s common stock at the start of 2014 was $47.50 and it declared and paid cash dividends of $3.28 per share. The Dividend yield ratio is:
Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.
The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount, dividing the result by the base period amount and multiplying that result by 100.
Selected current year company information follows:
Net income $15,953
Net sales 712,855
Total liabilities, beginning-year 83,932
Total liabilities, end-of-year 103,201
Total stockholders’ equity, beginning-year 198,935
Total stockholders’ equity, end-of-year 121,851
The total asset turnover is:
Dividing Accounts receivable, net by Net sales and multiplying the result by 365 is the:
Average accounts receivable ratio.
Accounts receivable turnover ratio.
Days’ sales uncollected.
Refer to the following selected financial information from Dodge Company. Compute the company’s acid-test ratio.
Short-term investments 60,000
Accounts receivable, net 79,500
Merchandise inventory 115,000
Prepaid expenses 9,700
Accounts payable 111,400
Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.
Net income divided by average total assets is:
Total asset turnover.
Return on total assets.
Days’ income in assets.
The return on total assets ratio is a profitability measure.
A high level of expected risk suggests a low price-earnings (PE) ratio.
The base amount for a common-size balance sheet is usually total assets.
The ability to meet short-term obligations and to efficiently generate revenues is called:
Liquidity and efficiency.
Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:
Rajan Company’s most recent balance sheet reported total assets of $1.9 million, total liabilities of $0.8 million, and total equity of $1.1 million. Its Debt to equity ratio is:
The measurement of key relations among financial statement items is known as:
The return on total assets can be calculated as profit margin times total asset turnover.