Question 1

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Accepted Answer

A) True 
 B)False

Question 2

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percentage change for Year 2 compared to the base year is:

Accepted Answer

A) 104%. 
B) 100%. 
C) 4%. 
D) 96%. 
E) 4.2%. 
A) 104%. 
B) 100%. 
C) 4%. 
D) 96%. 
E) 4.2%.

Question 3

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

A) Financial reporting. 
B) Horizontal ratios. 
C) Investment analysis. 
D) Risk analysis. 
E) Vertical analysis. 
A) Financial reporting. 
B) Horizontal ratios. 
C) Investment analysis. 
D) Risk analysis. 
E) Vertical analysis.

Question 4

Financial reporting refers to:

Accepted Answer

A) The application of analytical tools to general-purpose financial statements. 
B) The communication of financial information useful for decision making. 
C) General-purpose financial statements only. 
D) Ratio analysis only. 
E) Profitability. 
A) The application of analytical tools to general-purpose financial statements. 
B) The communication of financial information useful for decision making. 
C) General-purpose financial statements only. 
D) Ratio analysis only. 
E) Profitability.

Question 5

Internal users of financial information:

Accepted Answer

A) Are not directly involved in operating a company. 
B) Are those individuals involved in managing and operating the company. 
C) Include shareholders and lenders. 
D) Include directors and customers. 
E) Include suppliers,regulators,and the press. 
A) Are not directly involved in operating a company. 
B) Are those individuals involved in managing and operating the company. 
C) Include shareholders and lenders. 
D) Include directors and customers. 
E) Include suppliers,regulators,and the press.

Question 6

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Accepted Answer

A) True 
 B)False

Question 7

Comparative calendar-year financial data for a company are shown below.Calculate the following ratios for the company for 2016:
(a)accounts receivable turnover
(b)day's sales uncollected
(c)inventory turnover
(d)days' sales in inventory

Accepted Answer

The answer of Comparative calendar-year financial data for a company...

Question 8

Profitability is the ability to generate positive market expectations.

Accepted Answer

A) True 
 B)False

Question 9

Industry standards for financial statement analysis:

Accepted Answer

A) Are based on a single competitor's financial performance. 
B) Are set by the government. 
C) Are available for the financial performance and condition of the company's industry. 
D) Are based on rules of thumb. 
E) Compare a company's income with its prior year's income. 
A) Are based on a single competitor's financial performance. 
B) Are set by the government. 
C) Are available for the financial performance and condition of the company's industry. 
D) Are based on rules of thumb. 
E) Compare a company's income with its prior year's income.

Question 10

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Accepted Answer

A) True 
 B)False

Question 11

A corporation reports the following year-end balance sheet data.Calculate the following ratios:
(a)working capital
(b)acid-test ratio
(c)current ratio
(d)debt ratio
(e)equity ratio
(f)debt-to-equity ratio

Accepted Answer

The answer of A corporation reports the following year-end balance...

Question 12

Calculate the percent increases for each of the following selected balance sheet items.

Accepted Answer

The answer of Calculate the percent increases for each of...

Question 13

Common-size statements:

Accepted Answer

A) Reveal changes in the relative importance of each financial statement item to a base amount. 
B) Do not emphasize the relative importance of each item. 
C) Compare financial statements over time. 
D) Show the dollar amount of change for financial statement items. 
E) Reveal patterns in data across successive periods. 
A) Reveal changes in the relative importance of each financial statement item to a base amount. 
B) Do not emphasize the relative importance of each item. 
C) Compare financial statements over time. 
D) Show the dollar amount of change for financial statement items. 
E) Reveal patterns in data across successive periods.

Question 14

Information from a manufacturing company's current year income statement follows.Calculate the company's (a)profit margin ratio, (b)gross margin ratio,and (c)times interest earned.

Accepted Answer

The answer of Information from a manufacturing company's current year...

Question 15

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current ratio is:

Accepted Answer

A) 1.4:1. 
B) 0.7:1. 
C) 0.3:1. 
D) 1:1. 
E) 0.4:1. 
A) 1.4:1. 
B) 0.7:1. 
C) 0.3:1. 
D) 1:1. 
E) 0.4:1.

Question 16

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount,dividing the result by the base period amount and multiplying that result by 100.

Accepted Answer

A) True 
 B)False

Question 17

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what were the percentage increases for Year 2 and Year 3 compared to the base year?

Accepted Answer

A) 80% for Year 2 and 90% for Year 3. 
B) 88% for Year 2 and 80% for Year 3. 
C) 88% for Year 2 and 90% for Year 3. 
D) 112.5% for Year 2 and 125% for Year 3. 
E) 125% for Year 2 and 112.5% for Year 3. 
A) 80% for Year 2 and 90% for Year 3. 
B) 88% for Year 2 and 80% for Year 3. 
C) 88% for Year 2 and 90% for Year 3. 
D) 112.5% for Year 2 and 125% for Year 3. 
E) 125% for Year 2 and 112.5% for Year 3.

Question 18

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

Accepted Answer

A) 3.1. 
B) 22.0. 
C) 93.8. 
D) 32.0. 
E) 3.3. 
A) 3.1. 
B) 22.0. 
C) 93.8. 
D) 32.0. 
E) 3.3.

Question 19

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Accepted Answer

A) True 
 B)False

Question 20

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750.The Days' sales in inventory (rounded to whole days)is:

Accepted Answer

A) 18 days. 
B) 418 days. 
C) 10 days. 
D) 56 days. 
E) 20 days. 
A) 18 days. 
B) 418 days. 
C) 10 days. 
D) 56 days. 
E) 20 days.

Exam 17: Analysis of Financial Statements

The return on common stockholder's equity measures a company's success in earning net income for its owners.

Yeats Corporation's sales in Year 1 were $396,000 and in Year 2 were $380,000.Using Year 1 as the base year,the percentage change for Year 2 compared to the base year is:

The comparison of a company's financial condition and performance to a base amount is known as:

Financial reporting refers to:

Internal users of financial information:

Market prospects are the ability to provide financial rewards sufficient to attract and retain financing.

Comparative calendar-year financial data for a company are shown below.Calculate the following ratios for the company for 2016: (a)accounts receivable turnover (b)day's sales uncollected (c)inventory turnover (d)days' sales in inventory

Profitability is the ability to generate positive market expectations.

Industry standards for financial statement analysis:

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

A corporation reports the following year-end balance sheet data.Calculate the following ratios: (a)working capital (b)acid-test ratio (c)current ratio (d)debt ratio (e)equity ratio (f)debt-to-equity ratio

Calculate the percent increases for each of the following selected balance sheet items.

Common-size statements:

Information from a manufacturing company's current year income statement follows.Calculate the company's (a)profit margin ratio, (b)gross margin ratio,and (c)times interest earned.

Jones Corp.reported current assets of $193,000 and current liabilities of $137,000 on its most recent balance sheet.The current ratio is:

The percent change of a comparative financial statement item is computed by subtracting the analysis period amount from the base period amount,dividing the result by the base period amount and multiplying that result by 100.

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what were the percentage increases for Year 2 and Year 3 compared to the base year?

A company had a market price of $27.50 per share,earnings per share of $1.25,and dividends per share of $0.40.Its price-earnings ratio equals:

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Zhang Company reported Cost of goods sold of $835,000 and ending Inventory of $41,750.The Days' sales in inventory (rounded to whole days)is:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Cost Accounting

Process Cost Accounting

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Appendix B: Time Value of Money

Appendix C: Activity-Based Costing

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