FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 9: Analyzing Financial Statements

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 121

Short Answer

Review LaterAdd Note

Review Later

Tri-World had income before interest and income tax expense of $129,000.Its interest expense was $67,000.Calculate the times interest earned ratio.

Correct Answer

verified

$129,000/$...

View Answer

Show Answer

Question 122

True/False

Review LaterAdd Note

Review Later

When the times interest earned ratio falls below 1.5,the default rate on liabilities increases sharply.

A) True
B) False

Correct Answer

verified

Show Answer

Question 123

True/False

Review LaterAdd Note

The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Harmony Inc.had profit of $225,300 in Year 1 and $320,900 in Year 2.The company had average total assets of $1,230,000 in Year 1 and $1,550,000 in Year 2.Calculate the return on total assets for Year 1 and Year 2.Comment on the results.

The debt ratio is calculated by dividing total assets by total liabilities.

A company must have less than 30 days' sales uncollected in order to have enough liquidity.

Vertical analysis is a tool to evaluate individual financial statement items or group of items in terms of a specific base amount.

The comparative balance sheet for Equevo Corp is shown below.Express the balance sheet in common-size percentages.(Round all percentages to two decimals)

Maggis has current assets of $19,000 and current liabilities of $9,500.Its current ratio is 1.6 to 1.

David Company had assets of $13,500,000,profit of $3,900,000,and net sales of $167,155,000.Its profit margin was 2.3%.

Explain return on total assets and how it is used to measure a company's financial performance.

Which of the following statements is incorrect?

Explain the purpose of financial statement analysis.

The current ratio

Micron Company had profit for Year 1 of $47,950 and $53,425 in Year 2.The company had net sales of $363,250 in Year 1 and $392,750 in Year 2.The company's average total assets in Year 1 were $942,550 and $877,560 in Year 2.Calculate Micron's profit margin,total asset turnover,and return on total assets for Year 1 and Year 2.Comment on the results. Profit margin,Year 1: $47,950/$363,250 = 13.2% Profit margin,Year 2: $53,245/$392,750 = 13.6% Total asset turnover,Year 1: $363,250/$942,550 = .385 Total asset turnover,Year 2: $392,750/$877,560 = .448 Return on total assets,Year 1: $47,950/942,550 = 5.1% Return on total assets,Year 2: $53,245/$877,560 = 6.1%

Income statement information for calendar 2020 for Eaglefield Corp is presented below: Calculate times interest earned for 2020.

Information from the current income statement of Barnes Corp follows: $\begin{array}{|l|r|}\hline \text { Sales } & \$ 800,000 \\\hline \text { Gross profit on sales } & 345,000 \\\hline \text { Operating income } & 80,000 \\\hline \text { Interest expense } & 32,000 \\\hline \text { Income before taxes } & 48,000 \\\hline \text { Profit } & 35,600 \\\hline\end{array}$ Calculate the profit margin.

Explain the profit margin ratio and discuss its use in analyzing a company's performance.

Saucony's profit was $800,000; its net assets were $2,050,000; and its net sales were $3,500,000.Calculate the profit margin.

BuyUS Inc.plans to issue 7%,$400,000,10-year bonds in order to finance an expansion.The expansion is expected to increase income before interest expense from $100,000 to $175,000.BuyUS has $1,000,000 in average common equity.Calculate the expected return on common shareholders' equity.(ignore income taxes)