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Exam 13: Analyzing Financial Statements

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Question 1

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The following data were available for Holiday Company: Sales revenue,$225,000 (including $75,000 cash sales) Cost of goods sold,$175,000 Average balance in inventory,$20,000 Average balance in accounts receivable,$20,000 Assume 365 days in the year Calculate each of the following ratios.Round your answers to two decimal places. A.Inventory turnover ratio B.Average days to sell inventory C.Receivable turnover ratio D.Average days to collect receivables

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A.Inventory turnover ratio = $175,000 ÷ ...

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Question 2

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Which of the following transactions will not increase the cash ratio?

A) Receiving cash from a common stock issue.
B) Refinancing a current liability with long-term debt.
C) Using cash to purchase a two-month treasury bill.
D) Collecting an account receivable.

E) C) and D)
F) None of the above

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C

Question 3

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The cash coverage ratio measures a firm's ability to pay its current liabilities with its cash flows from operating activities.

The following data were reported for Favre Company: Calculate each of the following ratios.Round your answers to two decimal places. A.Dividend yield B.Price/earnings ratio C.Quality of income

Which of the following transactions will increase a current ratio,which is currently 2.5?

Potaw Company reported the following data at the end of 2019: - What was the accounts receivable turnover ratio?

Which of the following is not a ratio included in analysis of the operating cycle?

The dividend yield ratio decreases when earnings per share increases.

Which of the following ratios is not an indicator of a company's short-term financial strength?

Finding comparable companies in order to compare performance is often difficult since no two companies have identical products,markets,and operating strategies.

Lee Company has provided the following information: • Cash flow from operating activities,$240,000 • Net income,$204,000 • Interest expense,$20,000 • Interest cash payments,$10,000 • Income tax payments,$140,000 • Income tax expense,$136,000 - Lee's quality of income ratio is closest to:

Which of the following statements is correct?

The records of Marshall Company include the following: -The return on assets (calculated using the modified method discussed in the text) is closest to:

Which of the following ratios increases when inventory is sold on account for a price equal to its original cost?

Home Depot's operating strategy is to offer a broad assortment of high-quality merchandise and services at competitive prices using highly knowledgeable service-oriented personnel and aggressive advertising.Which of the following is not as critical to achieving Home Depot's strategy?

The cash ratio measures how much cash is on hand to cover current liabilities.

During 2019,Home Style's cost of goods sold percentage was 68.2%,and selling and store operating costs were 19.3% of sales.During 2018,Home Style's cost of goods sold percentage was 70.1% while selling and store operating costs were 19.0% of sales.What effect would the change in these percentages have on 2019's gross profit percentage and net profit margin percentage?

MusicPod's earnings per share ratios were $2.47 and $2.07 respectively for 2019 and 2018.MusicPod's stock was trading at $53.00 and $41.50 per share at the end of 2019 and 2018 respectively.The company paid cash dividends per share of $0.85 in 2019 and $0.63 in 2018.Total stockholders' equity was $13,572 million and $11,896 million in 2019 and 2018 respectively.The common shares outstanding were approximately 1,782,000 in both 2019 and 2018. -MusicPod's dividend yield ratio for 2019 is closest to:

The journal entry to record depreciation expense decreases which of the following ratios?

The 2019 financial statements of Companies Y and Z showed the following: Part A: For each company,calculate the items listed in the following tabulation. Part B: Assuming both Company Y and Company Z are in the same industry,which company (Y or Z)appears to be the better investment and why?