Assignment: BASICS OF ANALYSIS: Quiz
MULTIPLE CHOICE
1. Statements in which all items are expressed only in relative terms (percentages of a base) are termed:
a. vertical Statements.
b. horizontal Statements.
c. funds Statements.
d. common-Size Statements.
e. None of the answers are correct.
2. Which of the following is not a source of industry statistics?
a. Annual Statement Studies
b. Mergent Dividend Record
c. Value Line
d. Standard and Poor's Industry Surveys
e. The Department of Commerce Financial Report
3. Which of the following is a government document that provides industry statistics?
a. The Wall Street Journal
b. Business Week
c. Dun's
d. The Department of Commerce Financial Report
e. Standard and Poor's Industry Survey
4. Which of these statements is false?
a. Many companies will not clearly fit into any one industry.
b. A financial service uses its best judgment as to which industry the firm best fits.
c. The analysis of an entity's financial statements can be more meaningful if the results are compared with industry averages and with results of competitors.
d. When using industry averages, it is often necessary to use an industry that the firm best fits.
e. A company comparison should not be made with industry averages if the company does not clearly fit into any one industry.
TRUE/FALSE
5. Liquidity ratios measure the degree of protection of long-term suppliers of funds.
6. Absolute figures usually have more meaning than ratio comparisons.
7. A service firm will usually have a low amount of inventory, consisting primarily of supplies.
8. There is a standard list of ratios.
9. For NAICS, each country can add additional detailed industries, provided the additional detail aggregates to the NAICS level.
PROBLEM
10. Comparative income statements for 2012 and 2011 follow.
|
|
2012
|
2011
|
|
Sales
|
$9,434,000
|
$7,862,000
|
|
Cost of Sales
|
7,075,400
|
5,660,640
|
|
Gross Profit
|
$2,358,600
|
$2,201,360
|
|
Operating Expenses
|
1,367,690
|
1,365,060
|
|
Operating Income
|
$ 990,910
|
$ 836,300
|
|
Interest Expense
|
157,500
|
126,000
|
|
Earnings Before Tax
|
$ 833,410
|
$ 710,300
|
|
Income Taxes
|
400,000
|
317,200
|
|
Net Income
|
$ 433,410
|
$ 393,100
|
Required:
a. Prepare a vertical common-size analysis of this statement for each year, using sales as the base.
b. Comment briefly on the changes between the two years, based on the vertical common-size statement.