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Exam 15: Financial Statement Analysis

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Question 141

True/False

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If the acid-test ratio is less than one,then paying off some current liabilities with cash will increase the acid-test (quick)ratio.

A) True
B) False

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Question 142

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Lasch Corporation has provided the following financial data from its balance sheet and income statement: -The company's times interest earned ratio for Year 2 is closest to:

A) 1.43
B) 3.47
C) 2.43
D) 1.00

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

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Question 143

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All other things the same,purchasing merchandise inventory would have no effect on the accounts receivable turnover ratio at a retailer.

For Year 2,Etzkorn Corporation's sales were $1,480,000,its gross margin was $580,000,its net operating income was $63,714,its net income before taxes was $42,714,and its net income was $29,900.The company's total stockholders' equity at the end of Year 2 amounted to $829,000 and at the end of Year 1 to $800,000.The company's return on equity for Year 2 is closest to:

Data from Dunshee Corporation's most recent balance sheet appear below: $\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \\\text { Current assets: }\\\text { Cash}&\$ 130 & \$ 100 \\\text { Accounts receivable, net.}&270 & 290 \\\text {Inventory }&90 & 110 \\\text {Prepaid expenses }&10 & 10\\\text { Total current assets. }&\$500&\$510\\\text { Total current liabilities }&\$230&\$220\end{array}$ Sales on account in Year 2 amounted to $1,170 and the cost of goods sold was $730. -The average collection period for Year 2 is closest to:

Vogelsberg Corporation has provided the following financial data: The company's net operating income in Year 2 was $62,308; its interest expense was $12,000; and its net income was $32,700.Dividends on common stock during Year 2 totaled $2,700.The market price of common stock at the end of Year 2 was $6.37 per share. Required: a.What is the company's times interest earned ratio for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's earnings per share for Year 2? e.What is the company's price-earnings ratio for Year 2? f.What is the company's dividend payout ratio for Year 2? g.What is the company's dividend yield ratio for Year 2? h.What is the company's book value per share at the end of Year 2?

Sperle Corporation has provided the following data concerning its stockholders' equity accounts: Net income for Year 2 was $30,400. Dividends on common stock during Year 2 totaled $6,400. The market price of common stock at the end of Year 2 was $3.08 per share. -The company's earnings per share for Year 2 is closest to:

Medina Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $2,000.The market price of common stock at the end of Year 2 was $1.49 per share. Required: a.What is the company's times interest earned ratio for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's net profit margin percentage for Year 2? e.What is the company's gross margin percentage for Year 2? f.What is the company's return on total assets for Year 2? g.What is the company's return on equity for Year 2? h.What is the company's earnings per share for Year 2? i.What is the company's price-earnings ratio for Year 2? j.What is the company's dividend payout ratio for Year 2? k.What is the company's dividend yield ratio for Year 2? l.What is the company's book value per share at the end of Year 2?

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: $\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \\\text { Cash}&\$ 74,000 & \$ 130,000 \\\text { Accounts receivable, net}&\$ 255,000 & \$ 240,000 \\\text {Inventory. }&\$ 173,000 & \$ 180,000 \\\text {Total current assets }&\$ 564,000 & \$ 610,000 \\\text {Total assets. }&\$ 1,350,000 & \$ 1,330,000 \\\text {Accounts payable }&\$ 170,000 & \$ 160,000 \\\text {Total liabilities }&\$ 633,000 & \$ 620,000 \\\text {Total stockholders' equity. }&\$ 717,000 & \$ 710,000 \\\text {Sales (all on account) }&\$ 1,290,000 & \\\text {Cost of goods sold }&\$ 700,000 &\end{array}$ -The company's average sale period for Year 2 is closest to:

Smay Corporation has provided the following data: $\begin{array}{lll}&\text { This Year}&\text { Last Year }\\\text { Accounts receivable ....... } & \$ 107,000 & \$ 108,000 \\\text { Inventory ..................... } & \$ 179,000 & \$ 187,000 \\\text { Sales on account .......... } & \$ 654,000 & \\\text { Cost of goods sold.......... } & \$ 461,000 &\end{array}$ The accounts receivable turnover for this year is closest to:

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

Dahn Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $1,600. The market price of common stock at the end of Year 2 was $2.37 per share. -The company's total asset turnover for Year 2 is closest to:

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

Ribaudo Corporation has provided the following financial data from its balance sheet and income statement: $\begin{array}{lrr}&\text { Year 2 } & \text { Year 1 } \\\text { Cash}&\$ 74,000 & \$ 130,000 \\\text { Accounts receivable, net}&\$ 255,000 & \$ 240,000 \\\text {Inventory. }&\$ 173,000 & \$ 180,000 \\\text {Total current assets }&\$ 564,000 & \$ 610,000 \\\text {Total assets. }&\$ 1,350,000 & \$ 1,330,000 \\\text {Accounts payable }&\$ 170,000 & \$ 160,000 \\\text {Total liabilities }&\$ 633,000 & \$ 620,000 \\\text {Total stockholders' equity. }&\$ 717,000 & \$ 710,000 \\\text {Sales (all on account) }&\$ 1,290,000 & \\\text {Cost of goods sold }&\$ 700,000 &\end{array}$ -The company's accounts receivable turnover for Year 2 is closest to:

A portion of Lapore Corporation's Balance Sheet appears below: $\begin{array}{lrr}\text { Liabilities and Stockholders' Equity }&{\text { Year 2 }} & \text { Year 1 } \\\text { Current liabilities: }& \\\text {Accounts payable }&\$ 209,000 & \$ 200,000 \\\text {Accrued liabilities }&27,000 & 30,000 \\\text {Notes payable,short term }&94,000 & 90,000 \\\text { Total current liabilities. }&330,000 & 320,000 \\\text {Bonds payable. }&280,000 & 280,000 \\\text {otal liabilities }& 610,000 & 600,000\\\text { Stockholders' equity: }\\\text {Common stock, \$ 4 parvalue }&360,000 & 360,000 \\\text {Additional paid-in capital }&70,000 & 70,000 \\\text {Retained earnings }&589,000 & 570,000\\\text {Total stockholders' equity. }&1,019,000&1,000,000\\\text {Total liabilities \& stockholders' equity. }&\$1,629,000&\$1,600,000\end{array}$ The company's debt-to-equity ratio at the end of Year 2 is closest to:

Schepp Corporation has provided the following financial data: Required: a.What is the company's times interest earned ratio for Year 2? b.What is the company's debt-to-equity ratio at the end of Year 2? c.What is the company's equity multiplier at the end of Year 2? d.What is the company's net profit margin percentage for Year 2? e.What is the company's gross margin percentage for Year 2? f.What is the company's return on total assets for Year 2? g.What is the company's return on equity for Year 2?

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

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

Financial statements for Maraby Corporation appear below: -Maraby Corporation's current ratio at the end of Year 2 was closest to:

Two-Rivers Inc.(TRI)manufactures a variety of consumer products.The company's founders have run the company for thirty years and are now interested in retiring.Consequently,they are seeking a purchaser,and a group of investors is looking into the acquisition of TRI.To evaluate its financial stability,TRI was requested to provide its latest financial statements and selected financial ratios.Summary information provided by TRI is presented below. Required: a.Calculate the select financial ratios for the fiscal year Year 2. b.Interpret what each of these financial ratios means in terms of TRI's financial stability and operating efficiency.