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Exam 17: Analysis of Financial Statements

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Question 21

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The four building blocks of financial analysis are (1) __________________, (2) ________________________, (3) ____________________ and (4) ___________________.

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Question 22

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The comparison of a company's financial condition and performance to a base amount is known as:

A) Financial reporting.
B) Horizontal ratios.
C) Investment analysis.
D) Risk analysis.
E) Vertical analysis.

F) None of the above
G) B) and D)

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Question 23

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In order to be classified as an extraordinary gain or loss, the item must be both (1) _________________________ and (2) _______________________.

Three of the most common tools of financial analysis include horizontal analysis, vertical analysis, and ratio analysis.

The return on total assets ratio is a profitability measure.

Comparative statements for Kool Corporation are shown below: Calculate trend percentages for all income statement amounts shown and comment on the results. Use 2010 as the base year. Comment on the results.

External users of accounting information make the strategic and operating decisions of a company.

Describe the purpose of vertical financial statement analysis and how it is applied.

Three of the most common tools of financial analysis are (1) _______________________, (2) _________________________, and (3) ____________________________.

Standards for comparisons in financial statement analysis include:

The base amount for a common-size balance sheet is usually total assets.

Horizontal analysis is used to reveal changes in the relative importance of each financial statement item.

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

The dollar change for a financial statement item is calculated by:

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

The current ratio and acid-test ratio are used to reflect the ____________ of a business.

Analysis of a single financial number is often of limited value.

A common focus of financial statement users in evaluating a company's performance includes evaluation of its (1) ____________________________, (2) ______________________, and (3) __________________________.

A company reports basic earnings per share of $3.50, cash dividends per share of $0.75, and a market price per share of $64.75. The company's dividend yield equals 21.4%. $0.75/$64.75 = 1.16%

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ______________________.