1/ Analysts use financial statements for their analysis for all of the following reasons except a/...
1/ Analysts use financial statements for their analysis for all of the following reasons except
a/ corporate performance.
b/ employee satisfaction.
c/ lending decisions.
d/ risks related to the investment.
2/ Consider the following income statement data for Barolo Inc.:
| 2020 | 2019 | ||
| Sales revenue | $97,300 | $86,200 | |
| Less: Cost of goods sold | 45,600 | 53,400 | |
| Gross profit | 51,700 | 32,800 | |
| Less: Selling and administration costs | 22,500 | 18,300 | |
| Net Income |
$29,200 |
$14,500 |
Based on common-size analysis, which of the following statements is correct?
a/ The increase in sales revenue in 2020 was caused by higher selling and administrative expenses.
b/ The company's cost to sales ratio improved in 2020.
c/ The increase in gross profit in 2020 was due to increased sales.
d/ Net income as a percent of sales declined in 2020.
Homework Answers
| 1 |
| Analysts use financial statements for their analysis except employee satisfaction. |
| Employee satisfaction is a qualitative factor and cannot be analyzed from financial statements analysis. |
| Corporate performance, lending decisions and risks related to the investment can be analyzed based on financial statements. |
| Option B is correct |
| 2 | ||||
| 2020 | 2019 | |||
| Amount | % | Amount | % | |
| Sales revenue | 97300 | 100% | 86200 | 100% |
| Less: Cost of goods sold | 45600 | 47% | 53400 | 62% |
| Gross profit | 51700 | 53% | 32800 | 38% |
| Less: Selling and administration costs | 22500 | 23% | 18300 | 21% |
| Net Income | 29200 | 30% | 14500 | 17% |
| The company's cost to sales ratio improved in 2020. |
| Company’s cost of goods sold to sales improved in 2020. It decreased from 62% to 47% |
| The increase in gross profit in 2020 was due to increased sales and decrease in cost of goods sold as a percentage of sales revenue. |
| Net income as a percent of sales improved in 2020. |
| Option B is correct |
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