Financial Reporting and Analysis Practice Quiz and Questions

The following information pertains to Moose Corporation:

	2010	2009
Net sales	$350,000	$342,000
Net accounts receivable	189,000	197,000
Allowance for bad debts	5,500	7,000
Total assets	430,000	425,000

What are the different ratios that can be deduced and interpreted from the above?

Summary information from the financial statements of two companies competing in the same industry follows.

		Barco Company		Kyan Company				Barco Company		Kyan Company
Data from the current year-end balance sheets						Data from the current year's income statement
Assets						Sales	$	770,000	$	883,200
Cash	$	19,000	$	34,000		Cost of goods sold		588,100		648,500
Accounts receivable, net		34,400		51,400		Interest expense		9,300		12,000
Current notes receivable (trade)		10,000		7,400		Income tax expense		14,800		24,383
Merchandise inventory		84,540		136,500		Net income		157,800		198,317
Prepaid inventory		5,400		7,400		Basic earnings per share		4.15		4.59
Plant assets, net		320,000		312,400		Cash dividends per share		3.78		3.95
Total assets	$	473,340	$	549,100

		Barco Company		Kyan Company				Barco Company		Kyan Company
Liabilities and Equity						Beginning-of-year balance sheet data
Current liabilities	$	67,340	$	101,300		Accounts receivable, net	$	25,800	$	51,200
Long-term notes payable		84,800		111,000		Current notes receivable (trade)		0		0
Common stock, $5 per value		190,000		216,000		Merchandise inventory		59,600		115,400
Retained earnings		131,200		120,800		Total assets		418,000		402,500
						Common stock, $5 par value		190,000		216,000
Total liabilities and equity	$	473,340	$	549,100
						Retained earnings		117,040		93,123

For both companies compute the (a) profit margin ratio, (b) total asset turnover, (c) return on total assets, and (d) return on common stockholders' equity. Assuming that share and each company's stock can be purchased at $100 per share, compute their (e) price-earnings ratios and (f) dividend yields.

For both companies compute the (a) current ratio, (b) acid-test ratio, (c) accounts (including notes) receivable turnover, (d) inventory turnover, (e) days' sales in inventory, and (f) days' sales uncollected.

What components of a financial statement do you compare when you are to analyze them?

What do you understand by valuation and why there is a need for valuation?

Tammy’s Tool Company is a retail store that sells tools to construction companies across the country. Tammy reported net income of $200,000 and issued preferred dividends of $20,000 during the year. Tammy also had 30,000, $5 par common shares outstanding during the year. Compute Return on Equity.

  

Differentiate between net income, EPS, EBITDA, net cash flow, NOPAT, free cash flow, MVA, and EVA.

What is the primary purpose of each item; that is, when and how is it used?

Which of the following can be found from an analysis of a firm's financial statements?

The current price of the firm's common stock

Any recent changes in the firm's credit rating

Projected earnings for the upcoming year

Recent changes in the firm's liquidity position

Which one of the following items is considered a period cost?

Insurance expense [for an office building]

Warranty cost for products sold

Merchandise inventory

Sales commission expenses