QUESTIONS- Financial Statements/Financial Analysis

1. An example of a financial statement is ________.

A) the Income Statement
B) the Sources and Uses of Cash
C) the Statement of Financial Position (Balance Sheet)
D) all of these

2. Total liabilities are $200,000 and total owners' equity is $100,000. What are total assets?
A) We need to know retained earnings before we can compute total assets.
B) We need more information on current and long-term assets before we can compute total
assets.
C) $200,000
D) $300,000

3. The revenue is $10,000, the cost of goods sold is $2,000, the selling, general and
administrative expenses are $3,000, addition to retained earnings are $2,000, and depreciation
is $1,000. What is the EBIT?
A) -$1,000. B) $2,000. C) $3,000 D) $4,000

4. A current ratio greater than 2 can tell us that the company ________.
A) should be able to cover the current liabilities
B) should be able to keep away from short-term cash problems
C) may have too much capital tied up in current assets
D) All of these

5. Which of the statements below is TRUE?

A) Inventory turnover is cost of goods sold divided by accounts receivables.
B) Receivables turnover is accounts receivable divided by sales.
C) Total asset turnover is profits divided by total assets.
D) A higher inventory turnover ratio signifies that inventory is moving faster.

6. Ace Engineering Inc. has a profit marjin ratio of 0.16, an asset turnover ratio of 1.5, a debt
to equity ratio of 0.40, and a total asset to equity ratio of 1.40. What is the firm's ROE?
A) 14.28%. B) 29.85%. C) 33.60%. D) 38.08%
Use the following financial statement information as of the end of each year to answer
following questions 7-11
2016 2017
Inventory 48.000 54.000
Current Assets 106.000 81.000
Total Assets 326.000 382.000
Current Liabilities 36.000 27.000
Total Liabilities 88.000 102.000
Shareholders’ Equity 198.000 240.000
Net Sales 697.000 784.000
Costs of Goods Sold 277.000 306.000
Net Income 90.000 134.000
Tax Expense 18.000 22.000
Financing Expense
12.000 12.000
(Interest Expense)

7. Compute assets turnover ratio for 2017.

A) 2,40 B) 2,05 C) 2,13 D)1,82

8. Compute short-term dept ratio for 2017.

A) %11,04 B) %8,28 C) %9,42 D) %7,07

9. Compute acid-test ratio for 2017.

A) 0,75 B) 1 C) 1,61 D) 2,15

10. Compute return on equity for 2017.

A) %45,45 B) %37,50 C) %55,83 D) %59,40

11. Compute times interest earned for 2017.

A) 11,22 B) 13,00 C) 14,00 D) 3,92

12. The following information was taken from the financial statements of Coca- Cola and
PepsiCo (dollar amounts in millions). Please perform DuPont analysis in both companies and
discuss the comparison.

2018 2017
Coco Cola
Income Statement
Sale 31.944 28.857
Net Income 5.807 5.981
Balance Sheet
Assets 40.519 43.269
Shareholders’ Equity 20.472 21.744
Pepsi Co.
Sales 43.251 39.474
Net Income 5.142 5.658
Balance Sheet
Assets 35.994 34.628
Shareholders’ Equity 12.203 17.325