Questions for
Assignment 2
Course Title: Financial Statement Analysis
Course Code: BCAC 312
1442 – 1443 H / 2021 – 2022 G
Fall (1st) Semester
CLO 2.1
Analyze complex financial information using trends and ratios.
1. Which of the following would not be a reasonable conclusion when comparing lifo—fifo under an inflationary
condition?
a. Lifo generally results in a lower profit than does fifo.
b. Fifo reports a higher inventory ending balance.
c. Lifo results in a lower profit figure than does fifo.
d. Lifo would probably be used for inventory that has a high turnover rate because there would be an
immaterial difference in the results between lifo and fifo.
2. Which of the following ratios would generally be used to evaluate a firm's overall liquidity position?
a. Working capital
b. Current ratio
c. Acid-test ratio
d. Cash ratio
3. By reporting marketable equity securities under current assets, management picks up a liquidity advantage.
4. Customer concentration can be an important consideration in the quality of receivables.
5. Working capital is considered to be more indicative of the short-term, debt-paying ability than is the current
ratio.
CLO 2.2
Apply the basics tools of financial analysis.
6. Jones Company presents the following data for 2008.
Receivables, less allowance for losses and discounts of $12,196
Net Sales
Cost of Goods Sold
The days' sales in receivables is
a. 43.1
b. 48.2
c. 53.1
d. 38.1.
$ 266,700
$2,360,108
$1,580,360
Abbott Company presents the following data for 2008.
Receivables, end of year, less allowances for losses and discounts of $115,960
$ 2,370,100
Receivables, beginning of year, less allowance for losses and discounts of $102,330 $ 2,443,140
Net Sales
$24,417,090
The accounts receivable turnover in times per year is:
a. 6.9
b. 9.7
c. 10.7
d. 7.9
7. Smith Company presents the following data for 2008.
Inventories, beginning of year
$ 340,469
Inventories, end of year
$ 310,150
Cost of Goods Sold
$2,690,150
Net Sales
$8,690,150
The number of days' sales in inventory is:
a. 65.8
b. 42.1
c. 59.1
d. 58.1
8. Shaffer Company presents the following data for 2008.
Cost of Goods Sold, 2008
$1,800,326
Cost of Goods Sold, 2007
$1,000,120
Inventory, beginning of 2008
$ 143,169
Inventory, end of 2008
$ 376,526
The merchandise inventory turnover for 2008 is:
a. 5.6
b. 15.6
c. 7.5
d. 6.9
9. Szabo Company computed the following data for 2008.
Days' sales in receivables
38.7 days
Accounts receivable turnover in days
23.1 days
Days' sales in inventory
68.5 days
Inventory turnover in days
55.7 days
The estimated operating cycle for 2008 is:
a. 97.4 days
b. 107.2 days
c. 93.8 days
d. 78.8 days
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