Accounting smartbook chap 13

____ ____ is used to compare the dividend-paying performance of different companies. It is computed by taking annual cash dividends per share divided by market price per share.

-dividend -yield

All of the following are standards used in financial statement analysis for comparisons: (Check all that apply.)

-intracompany -industry -competitor

The measure of how long a company holds inventory before selling it is called the ____ ____.

-inventory -turnover

Vertical analysis is a tool to evaluate individual financial statement items or a group of items. When analyzing income statement accounts, the base is usually (revenue/expenses/net income) ____ and for balance sheet accounts, the base is usually total (assets/liabilities/equity) ____.

-revenue -assets

The amount of current assets minus current liabilities is called ____ ____.

-working -capital

At the end of the year, assets for Jordan company are $120,000 and liabilities are $40,000. The debt-to-equity ratio is:

0.5

Vertical analysis is also called ____-____ analysis.

-common -size

______ refers to a company's makeup of equity and debt financing.

Capital structure

______ balance sheets express each item as a percent of a base amount. The base amount is assigned a value of 100%. Multiple choice question. Benchmark

Common-size

______ income statements express each item as a percent of a base amount. The base amount is assigned a value of 100%.

Common-size

____ income statements include amounts for two or more periods, placed side by side.

Comparative

______ balance sheets consist of balance sheet amounts from two or more balance sheet dates, arranged side by side.

Comparative

The dividend yield is computed by taking:

annual cash dividends per share divided by market price per share

Return on total assets is computed by taking net income divided by:

average total assets

Days' sales in inventory is computed by taking ending inventory divided by Blank______ multiplied by 365.

cost of goods sold

The Blank______ ratio, or current assets divided by current liabilities, is used to evaluate a company's ability to pay its short-term obligations.

current

The ____ ratio, or current assets divided by current liabilities, is used to evaluate a company's ability to pay its short-term obligations.

current

The acid-test ratio takes the sum of cash, short-term investments, and Blank______ and divides the total by current liabilities. It helps determine immediate short-term debt-paying ability.

current receivables

The price-earnings ratio is computed by taking market price per common share divided by:

earnings per share

Days' sales in inventory is computed by taking Blank______ divided by cost of goods sold multiplied by 365.

ending inventory

The debt-to-equity ratio takes total liabilities divided by total ____

equity

Return on equity measures the amount of Blank______ earned for its owners. It is computed by taking net income divided by average total equity.

income

The times interest earned ratio is computed by taking income before interest expense and income taxes divided by ____ expense.

interest

The times interest earned ratio is computed by taking income before interest expense and income taxes divided by:

interest expense

The length of time that a company holds inventory prior to selling it is called the

inventory turnover

An investor in Able Inc. would like to understand Able's availability of resources to pay its short-term cash requirements. This type of analysis is known as a(n) (efficiency/liquidity) ____ measure.

liquidity

Days' sale in inventory is a useful measure in evaluating inventory (efficiency/liquidity) ____. It is computed by taking ending inventory divided by cost of goods sold multiplied by 365.

liquidity

The price-earnings ratio is computed by taking:

market price per common share divided by earnings per share

The dividend yield is computed by taking annual cash dividends per share divided by the:

market price per share

A(n) Blank______ is used to uncover conditions and trends which are difficult to see by looking at individual amounts. It can be expressed as a percent, rate, or proportion.

ratio

A potential investor in Denzel Co. would like to measure how frequently Denzel converts its account receivables into cash. The investor takes Denzel's net sales divided by average accounts receivable to determine this information, known as the accounts ____ turnover ratio.

receivables

The base amount used in a common-size income statement is Blank______.

revenue

Days' sales uncollected is computed by taking accounts receivable, net divided by net ____ multiplied by 365.

sales

Profit margin is computed by taking net income divided by net ____

sales

Total asset turnover is computed by taking net ____ divided by average total assets.

sales

(Solvency/efficiency) ____ refers to a company's ability to meet long-term obligations and generate future revenues.

solvency

Analysts typically use computation of dollar changes and percent changes because:

sometimes dollar changes are small, but percents are large

When interpreting measures from financial statement analysis, we need ____ (or benchmarks) for comparisons.

standards

The debt-to-equity ratio is computed by taking:

total liabilities divided by total equity

Return on total assets is computed by taking:

net income divided by average total assets

Profit margin is computed by taking:

net income divided by net sales

Total asset turnover is computed by taking Blank______.

net sales divided by average total assets.

Days' sales uncollected is a measure of how ____ a company collects accounts receivables computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365.

often

Small dollar changes can yield large percent changes consistent with their importance.

False

The base amount used in common-size balance sheets is total Blank______.

assets

Identify which of the following specific areas are considered the building blocks of financial statement analysis.

-Market prospects -Profitability -Solvency -Liquidity and efficiency

____ ____ turnover measures a company's ability to use its assets to generate sales and is an important indication of operating efficiency. It is computed by taking net sales divided by average total assets.

-Total -asset

Working capital can be computed by taking current ____ minus ____ current .

-asset -liability

A company has 20,000 shares of $5 par-value common stock issued and outstanding. Earnings per share were $4, annual cash dividends per share were $0.90, and market price per share is $90. Dividend yield is ____%.

1

A company has 10,000 shares of $10 par-value common stock issued and outstanding. Earnings per share were $8, annual cash dividends per share were $0.50, and market price per share is $30. Compute the dividend yield.

1.7%

A company reported Net Income for 2018 of $12,000 and for 2017 of $14,000. It reported Total Assets at the end of 2018 of $120,000 and at the end of 2017 of $100,000. Compute return on total assets for 2018.

10.9%

A company's market price is $60.00 per common share, book value is $10.00 per share, and the earnings is $5.00 per share. Compute price-earnings ratio.

12.0

A company reported Net Income for 2018 of $1,500 and for 2017 of $1,000. It reported Total Assets at the end of 2018 of $13,000 and at the end of 2017 of $11,000. Compute return on total assets for 2018.

12.5%

A company's market price is $40.00 per common share, book value is $10.00 per share, and the earnings is $3.00 per share. Compute price-earnings ratio.

13.3

At the end of the first year, assets for a company are $60,000 and liabilities are $40,000. The debt-to-equity ratio is ____.

2

A company has Total Assets of $34,000 including $3,000 in Accounts Receivable, and Net Sales of $40,000. Days' sales uncollected is Blank______ days.

27.4

A company has Total Assets of $135,000 including $29,000 in Accounts Receivable, and Net Sales of $380,000. Days' sales uncollected is Blank______ days.

27.9

Squire Co. had Net Sales of $3,000 in 2017 and $3,600 in 2018. It had Total Assets of $1,000 in 2017 and $1,400 in 2018. Total asset turnover would be ____ times in 2018.

3

A company reports net income before interest expense and income taxes of $18,000. Interest Expense for the period is $500 and Taxes are $4,000. Times interest earned is:

36

Blossom Co. had Net Sales of $3,600 in 2017 and $4,200 in 2018. It had Total Assets of $1,400 in 2017 and $1,600 in 2018. Total asset turnover would be computed in 2018 by taking Blank______.

4,200/1,500.

Marsh Co. had beginning inventory of $10,000 and ending inventory of $13,000. Cost of goods sold for the period was $65,000. Days' sales in inventory is Blank______ days.

73

Whisper Co. had Beginning Inventory of $20,000 and Ending Inventory of $26,000. Cost of goods sold for the period was $130,000. Days' sales in inventory is ____ days.

73

A company reports net income before interest expense and income taxes of $16,000. Interest Expense for the period is $200 and Interest Income for the period is $400. Times interest earned is:

80

______ is a useful measure in evaluating inventory liquidity. It is computed by taking ending inventory divided by cost of goods sold multiplied by 365.

Days' sales in inventory

__ is a measure of how frequently a company collects accounts receivables. It is computed by dividing the current balance of receivables by the annual credit (or net) sales and then multiplying by 365.

Days' sales uncollected

______ is used to compare the dividend-paying performance of different companies. It is computed by taking annual cash dividends per share divided by market price per share.

Dividend yield

______ refers to the availability of resources to pay short-term cash requirements. Analysis is aimed at a company's funding requirements.

Liquidity

Which of the following areas are not considered to be one of the building blocks of financial statement analysis?

Ratio analysis

______ are widely used tools of financial analysis that can help us uncover conditions and trends difficult to detect by inspecting individual amounts.

Ratios

______ measures the amount of net income earned for its owners. It is computed by taking net income divided by average total equity.

Return on equity

______ refers to a company's ability to meet long-term obligations and generate future revenues.

Solvency

______ measures a company's ability to use its assets to generate sales and is an important indication of operating efficiency. It is computed by taking net sales divided by average total assets.

Total asset turnover

______ analysis is a form of horizontal analysis that can reveal patterns in data across periods by comparing period amounts by base period amounts.

Trend

______ analysis is a form of horizontal analysis that can reveal patterns in data across periods. It is computed by taking the (analysis period amount/base period amount) x 100.

Trend

Days' sales uncollected is computed by taking Blank______, net divided by net sales multiplied by 365.

accounts receivable

The ratio that measures how frequently a company converts its account receivables into cash by taking net sales divided by average accounts receivable is known as:

accounts receivable turnover

The Blank______ ratio takes the sum of cash, short-term investments, and current receivables and divides the total by current liabilities. It helps determine immediate short-term debt-paying ability.

acid-test