C213 Test questions_ Well Updated with the Correct Answers 100% A+ Graded

C213 Test questions_ Well Updated with the Correct Answers 100% A+ Graded Financial statement analysis - ANS-Involves relationships and trends Analyzing financial statements, prognosis is - ANS-Prediction of how a business will perform in the future External users of financial statements use financial statement analysis for - ANS-Investing decisions Purpose of financial statement analysis - ANS-Diagnosis and Prognosis Liquidity - ANS-Ability a company has to pay its debts in the short run Asset turnover - ANS-Measures a firm's efficiency at using its assets Return on Equity (ROE) 1 - ANS-Fundamental measure of overall company performance Price-earnings ratio - ANS-Represents an indication of investor's expectations concerning a firm's growth potential Return on Equity (ROE) 2 - ANS-Calculated using numbers from both the income statement and the balance sheet Debt Ratio - ANS-used to measure a firm's leverage Return on Sales - ANS-Used to measure the profit earned on each dollar of sales in a firm Asset turnover equation - ANS-Sales revenue/Common stock + Total investments + Total PPE (property, plant, equip) Return on equity equation - ANS-Net income/Common stock + Add paid-in captial +Retained earnings Current Ratio - ANS-Measure of the liquid position of a corporation Return on Sales equation - ANS-Net Income/Sales Revenue Price-earnings ratio equation - ANS-Shares x Market price per share of common stock/Net income Payment of accounts payable - ANS-Could increase a firm's current ratio Debt Ratio equation - ANS-Total current liabilities + Total long-term liabilities/Common stock + Total investments + Total PPE Revenue - ANS-In a common-size income statement, each item on the statement is expressed as a % of Sales revenue - ANS-Common-size balance sheet, using the percent of sales method, each item on the balance sheet is typically expressed as a percentage of A useful tool in financial statement analysis is the common-size financial statement. What does this tool enable the financial analyst to do? - ANS-Compare the mix of revenue, and expenses, and determine efficient use of resources within a company over time or between companies within a given industry without respect to relative size. When using common-size statements - ANS-Data may be selected for the same business as of different dates, or for two or more businesses as of the same date Sales revenue on a common-size income statement EQUATION - ANS-Sales revenue/Sales revenue Common-sized financial statements - ANS-Most useful in analyzing companies of different sizes Cost of goods sold on a common-size income statement EQUATION - ANS-Current assets/Sales revenue Net income/Equity - ANS-Return on equity ratio under the DuPont framework is computed as Net income/Sales - ANS-Used to measure a firm's profitability Inventory turnover EQUATION - ANS-Cost of goods sold/Average Inventory Number of days sales in inventory - ANS-365 days in a year/Inventory turnover Leverage - ANS-Borrowing that allows a company to purchase more assets than its stockholders are able to pay for No stockholders' equity - ANS-When analyzing a company's debt ratio, if the ratio has a value that is equal to one, then the company has Times interest earned ratio - ANS-Net income + Tax expense + Interest expense/Interest expense