QUESTIONS 45 THROUGH 68 RELATE TO FINANCIAL STATEMENT ANALYSIS

59. - MOCK AND SAMPLE EXAMS CFA CFA LEVEL I MOCK EXAM AFTERNOON 2013
MOCK AND SAMPLE EXAMS CFA CFA LEVEL I MOCK EXAM AFTERNOON 2013
59. Income statements for two companies (A and B) and the common-sized income statement for the industry are provided below: All $ figures in ’000s Company A Company B Industry Sales $ 10,500 $ 8,250 100.0% Cost of goods sold 6,353 5,239 62.8% Selling, general, and administrative expenses 2,625 2,021 24.8% Interest expense 840 536 7.0% Pretax earnings 683 454 5.4% Taxes 205 145 1.7% Net earnings $ 478 $ 309 3.7% The best conclusion an analyst can make is that: A. Company B’s interest rate is lower than the industry average. B. both companies’ tax rates are higher than the industry average. C. Company A earns a higher gross margin than both Company B and the industry.