Internal Uses of Financial Statement Analysis Quiz

Basket Wonders has above average long-term debt utilization compared to the industry average.

The interest coverage ratio for Basket Wonders has been increasing since 2005.

The financial leverage ratio for Basket Wonders in 2007 is 0.47.

Basket Wonders' total capitalization ratio in 2006 is higher than the industry average.

In 2005, Basket Wonders had better interest coverage than the industry average.

Long-term debt constitutes a higher percentage of Basket Wonders' total capitalization in 2007 compared to 2006.

A strong current ratio indicates that a firm can cover its current liabilities with its current assets.

The acid-test ratio includes inventory in the calculation of liquidity.

A current ratio of 2.39 for Basket Wonders is weaker than the industry average in 2006.

Comparing "apples to apples" implies that one should evaluate similar companies using the same financial ratios.

A weak acid-test ratio suggests potential issues with the firm's inventory management.

The acid-test ratio is always higher than the current ratio for a company.

The Balance Sheet summarizes a firm's financial position by showing total assets equal to total liabilities minus owners' equity.

The Income Statement presents a firm's revenues and expenses over a specific period, concluding with net profit or loss for the period.

Basket Wonders had $1,195 in total current assets on December 31, 2007.

The amount owed by customers is categorized as fixed assets on the Balance Sheet.

Long-term investments are considered part of Basket Wonders' total liabilities on December 31, 2007.

Accumulated Tax Prepayments are included in Basket Wonders' net fixed assets on December 31, 2007.

Basket Wonders had a Gross Profit Margin of 31.3% in 2005.

In 2007, Basket Wonders had a higher Net Profit Margin than the industry average.

Return on Investment for Basket Wonders in 2006 was 5.0%.

Basket Wonders' Return on Equity in 2007 was 9.4%.

The Du Pont Approach equation for Earning Power is Sales profitability X Asset efficiency.

All the profitability ratios for Basket Wonders have been increasing since 2005.

Basket Wonders' COGS and administrative costs have been above industry averages for the past three years.

The interest coverage ratio of Basket Wonders is high.

According to the Common-size Analysis, all balance sheet items are divided by total liabilities.

Basket Wonders' inventories are at an acceptable level according to the analysis.

The Indexed Balance Sheets show that Basket Wonders' cash decreased from 2006 to 2007.

Basket Wonders' net fixed assets increased by 80.8% from 2005 to 2006.

In 2007, Basket Wonders' total liabilities and equity were equal.

According to the Indexed Income Statements, EBIT decreased from 2005 to 2006.

EAT stands for 'Extraordinary Accounting Transactions'.

Basket Wonders paid out all of its earnings as cash dividends in 2006.