Deck 14: Analysis and Interpretation of Financial Statements

Question 1

Asset turnover measures a company's solvency.

Answer 1

False

Question 2

Vertical analysis examines changes in financial data across time.

Answer 2

False

Question 3

Return on assets can be disaggregated into return on sales and return on common stockholders' equity ratio.

Answer 3

False

Question 4

Austin Plumbing Supplies has a return on assets of 25%, while the industry average of similar companies is 15%. This means that Austin Plumbing Supplies' asset turnover is higher than the industry average.

Question 5

One benefit of using ratio analysis to compare two firms in the same industry is that ratios are immune to size and current accounting rules.

Question 6

One key measure of profitability is the debt-to-equity ratio.

Question 7

A debt-to-equity ratio of greater than 1.0 means that a firm's liabilities exceed its owners' equity.

Question 8

Earnings per share is the amount a company earns and pays out as dividends for each share of common stock outstanding.

Question 9

A change in an accounting principle is reflected through adjustments to future financial statements and, therefore, requires no retroactive or present adjustments to financial statements.

Question 10

Changing from straight-line depreciation to double declining-balance depreciation is an example of a change in an accounting principle.

Question 11

Determining gross profit is the first step in a multiple-step income statement for a merchandising firm.

Question 12

The price-earnings ratio indicates how much an investor would have to earn to be able to purchase the stock.

Question 13

Revenues from discontinued operations of a company are reported separately from revenues from continuing operations on the income statement.

Question 14

Income effects of discontinued operations are reported separately from continuing operations on the income statement.

Question 15

Which one of the following ratios does not involve assets?

A) Account receivable turnover
B) Current ratio
C) Return on sales
D) Inventory turnover

Question 16

Which ratio can provide an indication of the salability of the company's products?

A) Account receivable turnover
B) Current ratio
C) Inventory turnover
D) Gross profit margin

Question 17

Which of the following is one measure of liquidity?

A) Debt-to-equity ratio
B) Times-interest-earned ratio
C) Quick ratio
D) None of the above

Question 18

Return on assets is computed as:

A) Net income / Average stockholders' equity
B) Net income / Average total assets
C) Return on sales × Asset turnover
D) B or C

Question 19

Aladdin Grocer's 2019 balance sheet shows average stockholders' equity of $18,000 million, net operating profit after tax of $1,710 million, net income of $665 million, and common shares issued of $2,874 million.
The company has no preferred shares issued. Aladdin Grocer's return on common stockholders' equity for the year is:

A) 18.61%
B) 3.69%
C) 7.37%
D) 11.07%

Question 20

Dils Brothers' 2019 balance sheet shows average stockholders' equity of $36,000 million, net operating profit after tax of $2,280 million, net income of $760 million, and common shares issued of $3,832 million.
The company has no preferred shares issued. Dils Brothers' return on common stockholders' equity for the year is:

A) 19.83%
B) 2.11%
C) 6.33%
D) 7.30%

Question 21

Aladdin Grocer's 2019 financial statements show average shareholders' equity of $15,309 million, net income of $2,940 million, and average total assets of $65,025 million.
How much is Aladdin Grocer's return on assets for the year?

A) 27.42%
B) 4.52%
C) 19.18%
D) 5.56%

Question 22

Dils Brothers' 2019 financial statements show average shareholders' equity of $20,412 million, net income of $5,040 million, and average total assets of $86,700 million.
How much is Dils Brothers' return on assets for the year?

A) 11.42%
B) 5.81%
C) 24.69%
D) 4.77%

Question 23

Aladdin Grocer's 2019 financial statements show net income of $2,940 million, sales of $230,199 million, and average total assets of $69,525 million.
How much is Aladdin Grocer's return on sales for the year?

A) 4.24%
B) 1.28%
C) 35.39%
D) 7.52%

Question 24

Dils Brothers' 2019 financial statements show net income of $5,040 million, sales of $306,932 million, and average total assets of $86,700 million.
How much is Dils Brothers' return on sales for the year?

A) 4.71%
B) 1.64%
C) 10.20%
D) 5.81%

Question 25

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute the gross profit percentage to the nearest hundredth of a percent. $$\begin{array} { c | c | c | c | c } \hline \text { Net income } & \begin{array} { c } \text { Gross profit } \\\text { on sales }\end{array} & \begin{array} { c } \text { Average } \\\text { total assets }\end{array} & \text { Sales } & \begin{array} { c } \text { Tax rate on } \\\text { operating profit }\end{array} \\\hline \mathbf { \$ 1 0 4 , 9 4 0 } & \mathbf { \$ 1 , 0 5 0 , 6 0 0 } & \mathbf { \$ 6 3 1 , 0 5 0 } & \mathbf { \$ 2 , 3 7 3 , \mathbf { 6 0 2 } } & \mathbf { 3 5 \% } \\\hline\end{array}$$

A) 4.42%
B) 8.56%
C) 28.76%
D) 44.26%

Question 26

Use the following selected 2019 balance sheet and income statement information for Life Improvements Co. (in millions) to compute the gross profit percentage to the nearest hundredth of a percent. $$\begin{array} {| c | c | c | c | c| } \hline \text { Net income } & \begin{array} { c } \text { Gross profit } \\\text { on sales }\end{array} & \begin{array} { c } \text { Average } \\\text { total assets }\end{array} & \text { Sales } & \begin{array} { c } \text { Tax rate on } \\\text { operating profit }\end{array} \\\hline \mathbf { \$ 2 7 9 , 0 4 0 } & \mathbf { \$ 2 , 1 0 1 , 2 0 0 } & \mathbf { \$ 1 , 0 8 1 , \mathbf { 0 0 0 } } & \mathbf { \$ 2 , 7 1 3 , 0 0 0 } & \mathbf { 3 5 \% } \\\hline\end{array}$$

A) 50.34%
B) 77.45%
C) 10.31%
D) 51.63%

Question 27

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute the return on assets to the nearest hundredth. $$\begin{array} {| c | c | c | c | c| } \hline \text { Net income } & \begin{array} { c } \text { Gross profit } \\\text { on sales }\end{array} & \begin{array} { c } \text { Average } \\\text { total assets }\end{array} & \text { Sales } & \begin{array} { c } \text { Tax rate on } \\\text { operating profit }\end{array} \\\hline \mathbf { \$ 1 0 4 , 9 4 0 } & \mathbf { \$ 1 , 0 5 0 , 6 0 0 } & \mathbf { \$ 6 3 1 , 0 5 1 } & \mathbf { \$ 2 , 3 0 4 , 7 5 6 } & \mathbf { 3 5 \% } \\\hline\end{array}$$

A) 14.83%
B) 22.78%
C) 4.42%
D) 16.63%

Question 28

Use the following selected 2019 balance sheet and income statement information for Homer Glen Supply Co. (in millions) to compute asset turnover (AT) to the nearest hundredth of a percent. $$\begin{array} { |c | c | c | c | c| } \hline \text { Net income } & \begin{array} { c } \text { Gross profit } \\\text { on sales }\end{array} & \begin{array} { c } \text { Average } \\\text { total assets }\end{array} & \text { Sales } & \begin{array} { c } \text { Tax rate on } \\\text { operating profit }\end{array} \\\hline \mathbf { \$ 6 9 , 9 6 0 } & \mathbf { \$ 7 0 0 , 4 0 0 } & \mathbf { \$ 3 6 0 , 6 0 0 } & \mathbf { \$ 1 , 3 5 6 , 5 0 4 } & \mathbf { 3 5 \% } \\\hline\end{array}$$

A) 0.27
B) 3.76
C) 17.30
D) 5.17

Question 29

In trend analysis, of what amount is each item expressed as a percentage?

A) Net income
B) Average total assets
C) Sales revenue
D) A base year amount

Question 30

Brown Enterprises reported sales revenue totaling $1,008,000, $1,002,000, and $1,239,000 in the years, 2018, 2019, and 2020, respectively.
Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?

A) 123.69%
B) 22.27%
C) 122.92%
D) 32.91%

Question 31

Ben Enterprises reported sales revenue totaling $1,344,000, $1,340,000, and $3,525,000 in the years, 2018, 2019, and 2020, respectively.
Performing trend analysis, with 2018 serving as the base year, what is the percentage for 2020?

A) 123.58%
B) 262.28%
C) 105.36%
D) 28.21%

Question 32

At December 31, 2019, David Bash Company has total assets of $1,000,000, total liabilities of $720,000, and total owner's equity of $280,000.
At December 31, 2019, David Bash Company's debt-to-equity ratio is:

A) 0.28
B) 5.00
C) 0.72
D) 2.57

Question 33

At December 31, 2019, Gevas Company has total assets of $3,000,000, total liabilities of $450,000, and total owner's equity of $2,550,000.
At December 31, 2019, Gevas debt-to-equity ratio is:

A) 0.18
B) 4.09
C) 0.65
D) 2.10

Question 34

At December 31, 2019, Jose Company has total assets of $1,800,000, total liabilities of $480,000, and total owner's equity of $1,320,000.
At December 31, 2019, Jose Company's debt-to-equity ratio is:

A) 0.36
B) 1.20
C) 2.75
D) 0.27

Question 35

The operating-cash-flow-to-current-liabilities ratio is computed by dividing a firm's a net cash flow from operating activities by:

A) Current liabilities at the end of the period
B) Current liabilities at the beginning of the period
C) Total liabilities at the middle of the period
D) Average current liabilities for the period

Question 36

Chinchilla Company is preparing trend percentages for its service fees earned for the period 2016 through 2020.
The base year is 2016. The 2019 trend percentage is computed as:

A) 2019 service fees earned divided by 2018 service fees earned
B) 2019 service fees earned divided by 2016 service fees earned
C) 2016 service fees earned divided by 2019 service fees earned
D) 2018 service fees earned divided by 2019 service fees earned

Question 37

Begeman Company's net income was $225,000 for 2018, $243,750 for 2019, and $293,160 for 2020. Assume trend percentages for net income over the three-year period are computed with 2018 serving as the base year.
The trend percentage for 2020's net income is:

A) 117.30%
B) 120.92%
C) 130.29%
D) 86.36%

Question 38

Javier Company reported net income of $4,550 million in 2019. The weighted average number of common shares outstanding during 2019 was 1,662 million shares. Javier paid $135 million in dividends on preferred stock.
How much is basic earnings per share amount for 2019?

A) $2.61
B) $2.55
C) $2.66
D) $2.75

Question 39

Zebra Company sells a segment of its operations at a loss. Zebra has not previously experienced such an event and does not expect to again.
The loss from the disposal of the segment should be reported in the income statement as:

A) A separate amount in comprehensive income
B) A separate amount in a discontinued operations section
C) A separate amount in net income from continuing operations
D) As part of cost of goods sold

Question 40

Information about a segment of the business that a company sells, abandons, or otherwise disposes of is reported in the:

A) Retained earnings statement
B) Comprehensive income of the income statement
C) Discontinued operations section of the income statement
D) Balance sheet

Question 41

A single-step income statement for a merchandising firm:

A) Shows a different net income amount than a multiple-step income statement
B) May not be used because it is an unacceptable reporting format
C) Does not show a gross profit on sales amount
D) None of the above

Question 42

World Airlines has no preferred stock outstanding. The company had 50,000 shares of common stock outstanding on January 1, 2019 and issued 20,000 additional shares on April 1.
If World's net income was $1,077,000, the company should report earnings per share of (to the nearest cent):

A) $12.81
B) $13.80
C) $16.57
D) $15.39

Question 43

Party, Inc. has no preferred stock outstanding. The company had 40,000 shares of common stock outstanding on January 1, 2019 and issued 12,000 additional shares on May 1.
If Party's net income was $200,000, the company should report earnings per share of (to the nearest cent):

A) $3.85
B) $4.44
C) $4.17
D) $5.24

Question 44

Texas, Inc. has net income for 2019 of $555,000. At January 1, 2019, the company had outstanding 54,000 shares of $75 par value common stock and 10,000 shares of 6%, $150 par value cumulative preferred stock. On September 1, 2019, an additional 18,000 shares of common stock were issued.
What is the earnings per share for 2019 (to the nearest cent)?

A) $6.66
B) $7.75
C) $6.47
D) $9.26

Question 45

Coconut Inc. has net income for 2019 of $272,000. At January 1, 2019, the company had outstanding 37,000 shares of $20 par value common stock and 5,000 shares of 8%, $100 par value cumulative preferred stock. On October 1, 2019, an additional 12,000 shares of common stock were issued.
What is the earnings per share for 2019 (to the nearest cent)?

A) $4.74
B) $5.80
C) $6.80
D) $5.40

Question 46

At December 31, 2019, Jamie, Inc. had 500,000 shares of common stock issued and outstanding, 250,000 of which had been issued and outstanding throughout the year and 250,000 of which were issued on July 1, 2019. Net income for the year ended December 31, 2019, was $2,385,000.
What is Jamie's 2019 earnings per common share (to the nearest cent)?

A) $3.13
B) $3.81
C) $4.77
D) $6.36

Question 47

At December 31, 2019, Van Devender's price-earnings ratio was 13.4. For 2019, Van Devender's net income was $660,000, its earnings per share was $7.00, and its annual dividend per share was $4.00.
What was the per share market price of Van Devender's stock at December 31, 2019?

A) $93.80
B) $40.20
C) $65.60
D) $53.60

Question 48

At December 31, 2019, Van Beek's price-earnings ratio was 14.6. For 2019, Van Beek's net income was $1,980,000, its earnings per share was $21.00, and its annual dividend per share was $12.00.
What was the per share market price of Van Beek's stock at December 31, 2019?

A) $306.60
B) $199.20
C) $248.40
D) $175.20

Question 49

In computing the price-earnings ratio, the current per share market price of the firm's common stock is divided by the:

A) Par value per common share
B) Dividends per common share
C) Earnings per common share
D) Net income for the year

Question 50

On the income statement of a merchandising company, interest income and interest expense are reported:

A) By offsetting interest income and interest expense and showing the excess as an operating revenue or expense
B) As separate items of other income and expense below the net operating income or loss
C) As part of cost of goods sold
D) By showing interest income as additional sales revenue and interest expense as an operating expense

Question 51

Selected balance sheet and income statement information for Forester Company follows in millions:
$$\begin{array} { l r } \text { Earnings before taxes } & \$ 850,175 \\\text { Average assets } & 5,456,781 \\\text { Net incame } & 1,614,471 \\\text { Average common stockholders' equity } & 4,481,322\end{array}$$ a. Calculate the company's return on common stockholders' equity.
b. Explain what information this provides to management.

Question 52

Selected balance sheet and income statement information from the Vegan's Company for fiscal years 2018 through 2020 follows (Amounts in millions):
$\begin{array}{crrrrrr}\text { Period } & \begin{array}{r}\text { Current } \\\text { assets }\end{array} & \begin{array}{r}\text { Current } \\\text { liabilities }\end{array} & \begin{array}{c}\text { Pretax } \\\text { income }\end{array} & \begin{array}{r}\text { Interest } \\\text { expense }\end{array} & \begin{array}{r}\text { Total } \\\text { assets }\end{array} & \text { Equity } \\\hline 2020 & \$ 15,306 & \$ 9,912 & \$ 4,834 & \$ 732 & \$ 39,526 & \$ 17,110 \\2019 & 18,662 & 13,146 & 7,182 & 732 & 42,080 & 18,226 \\2018 & 16,130 & 11,092 & 6,186 & 783 & 39,360 & 17,544\end{array}$
a. Compute the times-interest-earned ratio for each year and discuss any trends.
b. What concerns about Vegan's ability to meet its interest obligations might creditors have? Explain.

Question 53

Selected recent balance sheet and income statement information for the clothing companies: Coffee Plus and Tea Circle Corporation follows:
$\begin{array}{lcc} & \begin{array}{r}\text { Coffee Plus } \\\text { (in } \$ 000 \text { s) }\end{array} & \begin{array}{r}\text { Tea Circle Corporation } \\\text { (in millions) }\end{array} \\\hline \text { Cash } & \$ 9,758 & \$ 8,250 \\\text { Accounts receivable } & 49,290 & 31,347 \\\text { Inventory } & 478,346 & 32,306 \\\text { Total current liabilities } & 737,601 & 39,645 \\\text { Total liabilities } & 1,340,453 & 127,689 \\\text { Total equity } & 223,209 & 46,041 \\\text { Pre-tax income (loss) } & (177,756) & 13,552 \\\text { Interest expense } & 0 & 2,651\end{array}$
a. Calculate the current ratio and quick ratio for both companies.
b. Which company is more liquid?
c. Calculate the times-interest-earned and debt-to-equity ratios for both companies.
d. Which company is more solvent? Explain.

Question 54

Selected balance sheet and income statement information for two manufacturing companies: Stripe, Inc. and Polka-dot Corporation follows:
$\begin{array}{|c|c|c|}\hline & \begin{array}{c}\text { Stripe } \\\text { (in } \$ \text { millions) }\end{array} & \begin{array}{l}\text { Polka-dot } \\\text { (in } \$ \text { millions) }\end{array} \\\hline \text { Cash } & \$ 1,860 & \$ 26,558 \\\hline \text { Marketable securities } & 380 & 110 \\\hline \text { Accounts receivable } & 3,460 & 38,424 \\\hline \text { All other current assets } & 4,306 & 39,986 \\\hline \text { Total current liabilities } & 7,296 & 129,009 \\\hline \text { Total liabilities } & 9,592 & 148,564 \\\hline \text { Total equity } & 12,060 & 121,551 \\\hline \text { Pre-tax income } & 1,280 & 18,830 \\\hline \text { Interest expense } & 105 & 1,791 \\\hline\end{array}$
a. Calculate the current ratio and quick ratio for both companies.
b. Which company is more liquid?
c. Calculate the times-interest-earned ratio and debt-to-equity ratio for both companies.
d. Which company is more solvent?

Question 55

Selected recent balance sheet and income statement information for Frischmuth Systems, Inc. follows:
$$\begin{array} { l r r } \text { (in millions) } & 2019 & 2018 \\\hline \text { Average inventory } & \mathbf { \$ 2 9 4 } & \mathbf { \$ 3 1 0 } \\\text { Average accounts receivable } & \mathbf { 3 , 0 7 2 } & \mathbf { 3 , 8 9 4 } \\\text { Average accounts payable } & \mathbf { 8 3 7 } & \mathbf { 9 , 5 7 0 } \\\text { Sales } & 17,105 & \mathbf { 2 0 , 9 9 7 } \\\text { Cost of goods sold } & \mathbf { 0 , 7 2 9 } & 11,445 \\\hline\end{array}$$ a. Calculate accounts receivable turnover for both years. Has accounts receivable turnover improved during the year or worsened?
b. Calculate inventory turnover for 2019 and 2018. Has inventory turnover improved during the year or worsened?

Question 56

Selected recent balance sheet and income statement information for Shannon & Sisters Corporation follows:
$$\begin{array} { l r r } \text { (in millions) } & 2019 & { 2018 } \\\hline \text { Average inventory } & \mathbf { 2 1 , 0 1 2 } & \mathbf { \$ 2 3 , 8 6 8 } \\\text { Average accounts receivable } & \mathbf { 5 7 , 6 0 1 } & \mathbf { 5 2 , 7 5 5 } \\\text { Average accounts payable } & \mathbf { 2 9 , 7 2 6 } & \mathbf { 2 6 , 7 0 4 } \\\text { Sales } & \mathbf { 2 2 9 , 1 0 4 } & \mathbf { 2 3 6 , 7 2 8 } \\\text { Cost of goods sold } & 175,048 & 179,398 \\\hline\end{array}$$ a. Calculate accounts receivable turnover for 2019 and 2018. Has it improved during the year or worsened?
b. Calculate inventory turnover for 2019 and 2018. Has it improved during the year or worsened?

Question 57

Selected recent balance sheet and income statement information for Summersun, Inc. follows:
$$\begin{array} { l r r } \text { (in millions) } & 2019 & 2018 \\\hline \text { Average inventory } & \mathbf { 7 , 0 2 9 } & \mathbf { \$ 7 , 8 2 1 } \\\text { Average accounts receivable } & \mathbf { 7 , 3 0 5 } & \mathbf { 7 , 9 8 9 } \\\text { Average accounts payable } & \mathbf { 2 , 9 4 9 } & \mathbf { 3 , 4 0 0 } \\\text { Sales } & \mathbf { 3 7 , 8 0 0 } & \mathbf { 5 0 , 1 9 7 } \\\text { Cost of goods sold } & \mathbf { 3 0 , 2 0 9 } & \mathbf { 3 9 , 9 0 7 } \\\hline\end{array}$$ a. Calculate accounts receivable turnover for 2019 and 2018. Has it improved during the year or worsened?
b. Calculate inventory turnover for 2019 and 2018. Has it improved during the year or worsened?

Question 58

Selected recent balance sheet and income statement information for the computer software companies, Valley Enterprises and Mountain Industries follow:
$\begin{array}{lrr}\text { (\$ millions) } & {\begin{array}{c}\text { Valley } \\\text { Enterprises }\end{array}} & \begin{array}{r}\text { Mountain } \\\text { Industries }\end{array} \\\hline \text { Average accounts receivable } & \$ 36,414 & \$ 46,539 \\\text { Average accounts payable } & 8,194 & 14,436 \\\text { Net sales } & 215,616 & 246,036 \\\text { Cost of goods sold } & 88,598 & 100,810 \\\text { Net income } & 17,302 & 25,070 \\\text { Income tax expense } & 6,520 & 10,028\end{array}$
a. Compute accounts receivable turnover for Valley Enterprises and Mountain Industries.
b. Interpret and comment on the differences between the receivables turnover rates between each company assuming the industry average is 6.0 times.

Question 59

Selected recent balance sheet and income statement information for Book Products, Inc. follows (in $ millions):
$$\begin{array} { l r } \text { Average accounts receivable } & \$ 9,846 \\\text { Average inventory } & 5,814 \\\text { Net sales } & 56,504 \\\text { Cost of goods sald } & 30,632 \\\text { Pretax incame } & ( 933 ) \\\text { Net income } & ( 1,798 )\end{array}$$ Compute accounts receivable turnover and inventory turnover.

Question 60

The following is selected balance sheet and income statement information for Mario Company.
$\begin{array}{|c|c|c|c|c|c|c|}\hline & \begin{array}{l}\text { Current } \\\text { Assets }\end{array} & \begin{array}{c}\text { Gross Profit } \\\text { on Sales }\end{array} & \begin{array}{l}\text { Net } \\\text { Sales }\end{array} & \begin{array}{c}\text { Net } \\\text { Income }\end{array} & \begin{array}{c}\text { Average } \\\text { Total Assets }\end{array} & \begin{array}{l}\text { Average Common } \\\text { Stockholders' Equity }\end{array} \\\hline 81 & \$ 48,06 & \$ 200,680 & \$ 450,009 & \$ 45,216 & \$ 273,710 & \$ 151,668 \\\hline\end{array}$
Compute the following ratios:
a. Gross profit percentage
b. Return on sales
c. Asset turnover
d. Return on assets
e. Return on common stockholders' equity (Mario Company has no preferred stock)

Question 61

During 2019, Homewood Company had 50,000 shares of $30 par value common stock and 7,000 shares of 8%, $90 par value convertible preferred stock outstanding. Homewood Company's 2019 net income was $1,350,000.
Compute earnings per share for 2019.

Question 62

Listed below are five items or sections that may be found in a multiple-step income statement. Place the numbers 1 through 5 in to indicate the sequence of these items or sections in the income statement (with 1 assigned to the first item or section, and so on).

-Discontinued operations

A) 1
B) 2
C) 3
D) 4
E) 5

Question 63

Listed below are five items or sections that may be found in a multiple-step income statement. Place the numbers 1 through 5 in to indicate the sequence of these items or sections in the income statement (with 1 assigned to the first item or section, and so on).

-Net operating income

A) 2
B) 3
C) 4
D) 5
E) 6

Question 64

Listed below are five items or sections that may be found in a multiple-step income statement. Place the numbers 1 through 5 in to indicate the sequence of these items or sections in the income statement (with 1 assigned to the first item or section, and so on).

-Net income

A) 3
B) 4
C) 5
D) 6
E) 7

Question 65

Listed below are five items or sections that may be found in a multiple-step income statement. Place the numbers 1 through 5 in to indicate the sequence of these items or sections in the income statement (with 1 assigned to the first item or section, and so on).

-Net income from continuing operations

A) 4
B) 5
C) 6
D) 7
E) 8

Question 66

Listed below are five items or sections that may be found in a multiple-step income statement. Place the numbers 1 through 5 in to indicate the sequence of these items or sections in the income statement (with 1 assigned to the first item or section, and so on).

-Gross profit

A) 5
B) 6
C) 7
D) 8
E) 9

Question 67

During 2019, Fabulous Shoe Corporation had 75,000 shares of $10 par value common stock and 10,000 shares of 6%, $50 par value preferred stock outstanding. Fabulous Shoe Corporation's 2019 net income is $798,000.
Compute the earnings per share for 2019.

Question 68

During 2019, Koala Corporation had 160,000 shares of $15 par value common stock and 30,000 shares of 5%, $60 par value preferred stock outstanding. Koala Corporation's 2019 net income is $1,440,000.
Compute the primary earnings per share for 2019.

Question 69

The following information relates to Reed, Inc.:
a. Compute Cordova's 2019 earnings per share.
b. Compute Cordova's price-earnings ratio at December 31, 2019.

Question 70

Twin Lakes Company has the following values taken from its 2019 annual report (in thousands):
$$\begin{array} { l r } \text { Interest expense } & \$ 37,000 \\\text { Sales } & 480,000 \\\text { Earnings before interest and taxes } & 300,000 \\\text { Total liabilities } & 797,500 \\\text { Stockhalders' equity } & 600,000\end{array}$$ a. Calculate Twin Lakes Company's times-interest-earned ratio.
b. Calculate Twin Lakes Company's debt-to-equity ratio.

Question 71

Selected recent balance sheet and income statement information from Hats Co. and Gloves, Inc. follows:
$$\begin{array} { l r r } \text { (\$ millions) } & \text { Hats Co. } & \text { Gloves, Inc. } \\\hline \text { Sales } & \$ 7,230 & \$ 11,305 \\\text { Cost of goods sold } & \mathbf { 2 , 9 1 9 } & \mathbf { 3 } , 178 \\\text { Average accounts receivable } & 77 & 485 \\\text { Average irventory } & 770 & 1,449 \\\text { Average total assets } & 4,190 & 10,827\end{array}$$ a. Compute the following turnover rates for each company:
1. Accounts receivable turnover
2. Inventory turnover
3. Asset turnover
b. Interpret and comment on any differences you observe between the turnover rates for these two companies

Question 72

The balance sheets and income statements for Star Morning Communications follow:

a. Compute the company's current ratio for 2019 and 2018. Comment on any observed trend.
b. Compute the debt-to-equity ratio for 2019 and 2018. Comment on any observed trend.

Question 73

The partial balance sheets and income statements for Weasley's, Inc., for fiscal years ending June 30, 2019 and 2018 follow:
a. Calculate accounts receivable turnover for 2019 and 2018. Accounts receivable in 2017 totaled $29,831 million. Has accounts receivable turnover improved during the year or worsened?
b. Calculate inventory turnover for 2019 and 2018. Inventories in 2017 were $30,686 million. Has inventory turnover improved during the year or worsened?
c. Calculate asset turnover for 2019 and 2085 considering that 2017 total assets are $434,214 million.

Question 74

The income statements for Springdale Corporation for fiscal year 2019 (year ended January 30, 2019) follow:
a. Prepare a common-size income statement for 2019 and 2018. Round to one decimal place.
b. Comment on the most significant changes.

Question 75

The asset section of Fullerton Corporation's 2019 balance sheet follows:
a. Prepare a common-size statements for the asset section of Belmont's balance sheet for 2019 and 2018. Round to one decimal place.
b. Comment on the most significant changes.

Question 76

Consider the following results for Camire Brothers:
Prepare the income statement for this company assuming a 35% income tax rate. Omit the statement heading.