CH 17 ACC

Richards Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000. It had 50,000 shares of common stock outstanding during the entire year. Richards Corporation's common stock is selling for $35 per share. The price-earnings ratio is

7

Short-term creditors are typically most interested in analyzing a company's

liquidity

The following information is available for Jase Company: Market price per share of common stock $25.00 Earnings per share on common stock 1.25 Which of the following statements is correct?

The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year.

Which of the following is not a characteristic evaluated in ratio analysis?

marketability

The numerator for the return on common stockholders' equity computation is

net income minus preferred dividends

Horizontal analysis is a technique for evaluating financial statement data

over a period of time

On a common-sized income statement, 100% is assigned to

sales

The numerator for the computation of accounts receivable turnover is

sales

On a common-sized balance sheet, 100% is assigned to

total assets

Assume the following sales data for a company: Current year $797,635 Preceding year 601,060 What is the percentage increase in sales from the preceding year to the current year (rounded to one decimal place)?

32.7%

The comparative accounts payable and long-term debt balances for a company follow: Current YearPrevious YearAccounts payable$176,000 $200,000 Long-term debt168,950 155,000 Based on this information, what is the amount and percentage of increase or decrease that would be shown on a balance sheet with horizontal analysis?

accounts payable: 24,000--- decrease -----12% long-term debt: 13,950---- increase ----- 9%

Which of the following is not included in the computation of the quick ratio?

inventory

One reason that a common-sized statement is a useful tool in financial analysis is that it enables the user to

make a better comparison of two companies of different sizes in the same industry

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

vertical analysis

The percent of fixed assets to total assets is an example of

vertical analysis

In horizontal analysis, each item is expressed as a percentage of the

base year figure

Leverage implies that a company has

debt financing

Which of the following is the most useful in analyzing companies of different sizes?

common-sized financial statements

A company reports the following: Net income $160,000 Preferred dividends $10,000 Shares of common stock outstanding 20,000 Market price per share of common stock $35 The company's earnings per share on common stock is

$7.50

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

$720,000

Based on the following data, what is the accounts receivable turnover? Sales on account during year$ 700,000 Cost of merchandise sold during year 270,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year35,000 Merchandise inventory, beginning of year 90,000 Merchandise inventory, end of year 110,000

17.5

The relationship of $325,000 to $125,000, expressed as a ratio, is

2.6

Based on the following data for the current year, what is the inventory turnover? Sales on account during year $700,000 Cost of merchandise sold during year 270,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Merchandise inventory, beginning of year 90,000 Merchandise inventory, end of year 110,000

2.7

Based on the following data for the current year, what is the number of days' sales in receivables? Sales on account during year $584,000 Cost of merchandise sold during year 300,000 Accounts receivable, beginning of year 45,000 Accounts receivable, end of year 35,000 Merchandise inventory, beginning of year 90,000 Merchandise inventory, end of year 110,000

25 days

The relationship of $309,260 to $104,225, expressed as a ratio, is

3

The relationship of $337,157 to $110,746, expressed as a ratio, is

3

A company with $70,000 in current assets and $50,000 in current liabilities pays a $1,000 current liability. As a result of this transaction, the current ratio and working capital will

increase and remain the same, respectively