Industry standards for financial statement analysis: Multiple Choice Are used to compare a company's performance to industry performance. Are based on rules of thumb. Are set by the government. Compare a company's income with its prior year's income. Are based on a single competitor's financial performance.

Industry standards for financial statement analysis: Multiple Choice Are used to compare a company's performance to industry performance. Are based on rules of thumb. Are set by the government. Compare a company's income with its prior year's income. Are based on a single competitor's financial performance.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter2: Introduction To Financial Statements

Section: Chapter Questions

Problem 14MC: The three heading lines of financial statements typically include which of the following? A....

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Effect of Industry Characteristics on Financial Statement Relations. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.23 (pages 6263) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) Exhibit 1.23 also shows the ratio of cash flow from operations to capital expenditures. A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies and a brief description of their activities follow. A. Abercrombie Fitch: Sells retail apparel primarily through stores to the fashionconscious young adult and has established itself as a trendy, popular player in the specialty retailing apparel industry. B. Allstate Insurance: Sells property and casualty insurance, primarily on buildings and automobiles. Operating revenues include insurance premiums from customers and revenues earned from investments made with cash received from customers before Allstate pays customers claims. Operating expenses include amounts actually paid or expected to be paid in the future on insurance coverage outstanding during the year. C. Best Buy: Operates a chain of retail stores selling consumer electronic and entertainment equipment at competitively low prices. D. E. I. du Pont de Nemours: Manufactures chemical and electronics products. E. Hewlett-Packard: Develops, manufactures, and sells computer hardware. The firm outsources manufacturing of many of its computer components. F. HSBC Finance: Lends money to consumers for periods ranging from several months to several years. Operating expenses include provisions for estimated uncollectible loans (bad debts expense). G. Kelly Services: Provides temporary office services to businesses and other firms. Operating revenues represent amounts billed to customers for temporary help services, and operating expenses include amounts paid to the temporary help employees of Kelly. H. McDonalds: Operates fast-food restaurants worldwide. A large percentage of McDonalds restaurants are owned and operated by franchisees. McDonalds frequently owns the restaurant buildings of franchisees and leases them to franchisees under long-term leases. I. Merck: A leading research-driven pharmaceutical products and services company. Merck discovers, develops, manufactures, and markets a broad range of products to improve human and animal health directly and through its joint ventures. J. Omnicom Group: Creates advertising copy for clients and is the largest marketing services firm in the world. Omnicom purchases advertising time and space from various media and sells it to clients. Operating revenues represent commissions and fees earned by creating advertising copy and selling media time and space. Operating expenses includes employee compensation. K. Pacific Gas Electric: Generates and sells power to customers in the western United States. L. Procter Gamble: Manufactures and markets a broad line of branded consumer products. REQUIRED Use the ratios to match the companies in Exhibit 1.23 with the firms listed above.
Financial information for Lighthizer Trading Company for the fiscal year-ended September 30, 20xx, was collected. As part of a management training session, you have been asked to prepare an income statement format that will be used to distribute to management. Subtotals and totals are included in the information, but you will need to calculate the values. A. In the correct format, prepare the income statement using this information: B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $42,000 and 8% cost of capital. C. Prepare a short response to accompany the income statement that explains why uncontrollable costs are included in the income statement.
Effect of Industry Characteristics on Financial Statement Relations: A Global Perspective. Effective financial statement analysis requires an understanding of a firms economic characteristics. The relations between various financial statement items provide evidence of many of these economic characteristics. Exhibit 1.24 (pages 6667) presents common-size condensed balance sheets and income statements for 12 firms in different industries. These common-size balance sheets and income statements express various items as a percentage of operating revenues. (That is, the statement divides all amounts by operating revenues for the year.) A dash for a particular financial statement item does not necessarily mean the amount is zero. It merely indicates that the amount is not sufficiently large for the firm to disclose it. A list of the 12 companies, the country of their headquarters, and a brief description of their activities follow. A. Accor (France): Worlds largest hotel group, operating hotels under the names of Sofitel, Novotel, Motel 6, and others. Accor has grown in recent years by acquiring established hotel chains. B. Carrefour (France): Operates grocery supermarkets and hypermarkets in Europe, Latin America, and Asia. C. Deutsche Telekom (Germany): Europes largest provider of wired and wireless telecommunication services. The telecommunications industry has experienced increased deregulation in recent years. D. E.ON AG (Germany): One of the major public utility companies in Europe and the worlds largest privately owned energy service provider. E. Fortis (Netherlands): Offers insurance and banking services. Operating revenues include insurance premiums received, investment income, and interest revenue on loans. Operating expenses include amounts actually paid or amounts it expects to pay in the future on insurance coverage outstanding during the year. F. Interpublic Group (U.S.): Creates advertising copy for clients. Interpublic purchases advertising time and space from various media and sells it to clients. Operating revenues represent the commissions or fees earned for creating advertising copy and selling media time and space. Operating expenses include employee compensation. G. Marks Spencer (U.K.): Operates department stores in England and other retail stores in Europe and the United States. Offers its own credit card for customers purchases. H. Nestl (Switzerland): Worlds largest food processor, offering prepared foods, coffees, milk-based products, and mineral waters. I. Roche Holding (Switzerland): Creates, manufactures, and distributes a wide variety of prescription drugs. J. Sumitomo Metal (Japan): Manufacturer and seller of steel sheets and plates and other construction materials. K. Sun Microsystems (U.S.): Designs, manufactures, and sells workstations and servers used to maintain integrated computer networks. Sun outsources the manufacture of many of its computer components. L. Toyota Motor (Japan): Manufactures automobiles and offers financing services to its customers. REQUIRED Use the ratios to match the companies in Exhibit 1.24 with the firms listed above.
The metrics based on financial numbers produced by the accounting system are ________. A. quantitative factors B. qualitative factors C. stakeholders D. stockholders
The following information is taken from the records of Baklava Bakery for the year 2019. A. Calculate net income or net loss for January. B. Calculate net income or net loss for February. C. Calculate net income or net loss for March. D. For each situation, comment on how a stakeholder might view the firms performance. (Hint: Think about the source of the income or loss.)
Each of the following situations relates to a different company. A. For each of these independent situations, find the missing amounts. B. How would stakeholders view the financial performance of each company? Explain.
PURPOSE OF ACCOUNTING Match the following users with the information needed. 1. Ownersa. Whether the firm can pay its bills on time 2. Managersb. Detailed, up-to-date information to measure business performance (and plan for future operations) 3. Creditorsc. To determine taxes to be paid and whether other regulations are met 4. Government agenciesd. The firms current financial condition
The three heading lines of financial statements typically include which of the following? A. company, statement title, time period of report B. company headquarters, statement title, name of preparer C. statement title, time period of report, name of preparer D. name of auditor, statement title, fiscal year end