To examine the trends over time within a single firm or compare firms of different sizes, you should use:
Answer(s): C
Common size statements normalize the financial data to allow easier comparison of different-size firms.
Stock dividends have the greatest impact on which section of the balance sheet?
Answer(s): E
The effect of stock dividends is recorded by transferring part of the retained earnings to the contributed capital accounts. Because of the increase in contributed, it is often described as capitalizing retained earnings.
The following data are available for a firm for a given year:Net Sales 21,896Sales & marketing expenses 4,346Administrative expenses 2,143COGS 10,084Depreciation 967Interest expense 573Tax rate 35%Dividends paid 3,445Preferred Dividends 897Average total equity 37,432Average common equity 26,782Average total liabilities 18,583In the above example, the firm's net profit margin equals ________.
Answer(s): D
Net Profit Margin = Net Income/Net Sales Net Income = Earnings after depreciation, interest expense and taxes= (21,896 - 4,346 - 2,143 - 10,084 - 967 - 573)*(1 - 0.35) = 2,459.Therefore, Net Profit Margin = 2,459/21,896 = 0.11.
Capital stock (common stock)
Answer(s): B
Capital (common) stock is a class of stock that represents ownership interest in a firm. Common stockholders are typically the only shareholders that have voting privileges because they are the true owners of the firm.Investors bear the greatest risk when purchasing common stock because common stockholders stand last in line when it comes to the payment of income, or assets in the event of liquidation. By like token, common stockholders reap the greatest rewards because all earnings of a firm in excess of all obligations belong to the common stockholders.
On a statement of cash flows that uses the indirect approach, calculation of cash flow from operations treats depreciation as an adjustment to reported net income because
Depreciation is an expense that reduces net income, but it is a non-cash item.
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