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Exam 16: Financial Statement Analysis

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Question 171

Multiple Choice

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Kovack Corporation's net operating income in Year 2 was $66,571, net income before taxes was $46,571, and the net income was $32,600. Total common stock was $120,000 at the end of both Year 2 and Year 1. The par value of common stock is $2 per share. The company's total stockholders' equity at the end of Year 2 amounted to $962,000 and at the end of Year 1 to $930,000. The company declared and paid $600 dividends on common stock. The market price per share was $4.37. The company's dividend yield ratio for Year 2 is closest to:

A) 0.2%
B) 1.3%
C) 1.9%
D) 0.5%

E) None of the above
F) A) and B)

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Question 172

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Recher Corporation's common stock has a par value of $3 per share and has been stable at a total value of $270,000 on the company's balance sheet for several years. The total stockholders' equity at the end of this year was $1,023,000 and at the beginning of the year was $1,010,000. Net income for the year was $17,500. Dividends on common stock during the year totaled $4,500. The market price of common stock at the end of the year was $3.76 per share.The company's price-earnings ratio is closest to: (Round your intermediate calculations to 2 decimal places.)

A) 19.79
B) 0.51
C) 8.36
D) 12.53

E) None of the above
F) B) and C)

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Question 173

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Data from Lheureux Corporation's most recent balance sheet and the company's income statement appear below: The debt-to-equity ratio at the end of Year 2 is closest to:

The Seabury Corporation has a current ratio of 4.2 and an acid-test ratio of 3.9. The corporation's current assets consist of cash, marketable securities, accounts receivable, and inventories. Inventory equals $18,000. Seabury Corporation's current liabilities must be: (Round your intermediate calculations to 1 decimal place.)

An increase in the number of shares of common stock outstanding will increase a company's price-earnings ratio if the market price per share remains unchanged.

Macmillan Corporation has provided the following financial data: Dividends on common stock during Year 2 totaled $7,200. The market price of common stock at the end of Year 2 was $3.69 per share.The company's acid-test (quick) ratio at the end of Year 2 is closest to:

In determining whether a company's financial condition is improving or deteriorating over time, horizontal analysis of financial statement data would be more useful than vertical analysis.