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Exam 23: Financial Statement Analysis

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Question 71

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Since each company is unique, comparison of the company data with industry averages is of no use in financial analysis.

A) True
B) False

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Question 72

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What is a ratio that measures financial strength?

A) ratio of stockholders' equity to total liabilities
B) current ratio
C) working capital
D) rate of return on sales

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

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Question 73

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As a result of extraordinary losses during the year, the number of times bond interest earned ratio decreased from 4.5 times to 1.5 times. This change is indicative of increasing financial strength.

Use the following information for the questions Shaw Enterprises Comparative Balance Sheet December 31, 2020 and 2019 -Using the information given below, calculate the gross profit percentage based on net sales. What conclusions can be made about this company based on this trend analysis?

If total merchandise available for sale is 80 percent of net sales and ending inventory is 26 percent of net sales, gross profit on sales is:

Use the following information for the questions. -Using the information shown, prepare a horizontal analysis. Carry all calculations to two decimal places and then round to one decimal place.

Sybaritic Corporation Income Statement For the Year Ended September 30, 2020 & 2019 Sybaritic Corporation Balance Sheet September 30, 2020 -Using the information given, analyze the financial strength of Sybaritic Corporation for 2020.

The following financial information was taken from a firm's accounting records on December 31, 2019. Use this information to determine the items below. $\begin{array}{lr}\text { Net Sales } & \$ 1,760,000 \\\text { Income Tax Expense } & 12,525 \\\text { Net Income After Income Tax } & 230,000 \\\text { Common Stock ( } \$ 25 \text { par value) } & 889,000 \\\text { Retained Earnings } & 276,000\end{array}$ Cash dividends of $27,200 were paid on the common stock in 2019. Market price of the common stock on December 31 was $62. (1.)Rate of return on common stockholders' equity (2.) Earnings per share of common stock (3.) Price-earnings ratio (4.) Yield on common stock

The price-earnings ratio is computed by dividing the current market value per share by the----------.

Differentiate between horizontal analysis and trend analysis. What does each reveal about the company being analyzed?

On a comparative balance sheet that shows horizontal analysis, the percentage of change in the total assets must equal the percentage of change in the total of liabilities and stockholders' equity.