Questions from Financial Reporting

Q: Profits might be compared with sales, assets, or stockholders’ equity

Profits might be compared with sales, assets, or stockholders’ equity. Why might all three bases be used? Will trends in these ratios always move in the same direction?

Q: What is the advantage of segregating extraordinary items in the income statement

What is the advantage of segregating extraordinary items in the income statement?

Q: If profits as a percent of sales decline, what can be

If profits as a percent of sales decline, what can be said about expenses?

Q: Would you expect the profit margin in a quality jewelry store to

Would you expect the profit margin in a quality jewelry store to differ from that of a grocery store? Comment.

Q: Zebra Company has incurred substantial financial losses in recent years. Because

Zebra Company has incurred substantial financial losses in recent years. Because of its financial condition, the ability of the company to keep operating is in question. Management prepares a set of f...

Q: Define financial leverage. What is its effect on earnings? When

Define financial leverage. What is its effect on earnings? When is the use of financial leverage advantageous and disadvantageous?

Q: Given a set level of earnings before interest and tax, how

Given a set level of earnings before interest and tax, how will a rise in interest rates affect the degree of financial leverage?

Q: Why does a relatively new firm often have a low dividend

Why does a relatively new firm often have a low dividend payout ratio? Why does a firm with a substantial growth record and/or substantial growth prospects often have a low dividend payout ratio?

Q: The denominator of the earnings per share computation includes the weighted average

The denominator of the earnings per share computation includes the weighted average number of common shares outstanding. Why use the weighted average instead of the year-end common shares outstanding....

Q: Preferred dividends decreased this year because some preferred stock was retired.

Preferred dividends decreased this year because some preferred stock was retired. How would this influence the earnings per share computation this year?