Question 1

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

A) True 
 B)False

Question 2

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

The answer of The comparison of a company's financial condition...

Question 4

Comparative calendar year financial data for a company are shown below.Calculate the following ratios for 2016:
(a)return on total assets
(b)return on common stockholders' equity.

Accepted Answer

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

Question 5

The greater the times interest earned ratio,the greater the risk a company is exposed to.

Accepted Answer

A) True 
 B)False

Question 6

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________________________.

Accepted Answer

The answer of The income level most likely to continue...

Question 7

Net sales divided by average total assets is the:

Accepted Answer

A) Profit margin. 
B) Total asset turnover. 
C) Current ratio. 
D) Sales return ratio. 
E) Return on total assets. 
A) Profit margin. 
B) Total asset turnover. 
C) Current ratio. 
D) Sales return ratio. 
E) Return on total assets.

Question 8

Earnings per share are calculated only on income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 9

Selected balances from a company's financial statements are shown below.Calculate the following ratios for 2016:
(a)accounts receivable turnover
(b)inventory turnover
(c)days' sales uncollected
(d)days' sales in inventory
(d)profit margin
(e)return on total assets.

Accepted Answer

The answer of Selected balances from a company's financial statements...

Question 10

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

A) True 
 B)False

Question 11

If a company is comparing this year's financial performance to last year's financial performance,it is using horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 12

Clairmont Industries reported Net income of $283,000 and average Total assets of $637,000.The Return on total assets is:

Accepted Answer

A) 55.6%. 
B) 88.8%. 
C) 61.5%. 
D) 44.4%. 
E) 125.1%. 
A) 55.6%. 
B) 88.8%. 
C) 61.5%. 
D) 44.4%. 
E) 125.1%.

Question 13

For the following financial statement items,calculate trend percentages using 2014 as the base year:

Accepted Answer

The answer of For the following financial statement items,calculate trend...

Question 14

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is the:

Accepted Answer

A) Acid-test ratio. 
B) Merchandise turnover. 
C) Price earnings ratio. 
D) Accounts receivable turnover. 
E) Profit margin ratio. 
A) Acid-test ratio. 
B) Merchandise turnover. 
C) Price earnings ratio. 
D) Accounts receivable turnover. 
E) Profit margin ratio.

Question 15

Financial analysis only refers to the communication of relevant financial information to decision makers.

Accepted Answer

A) True 
 B)False

Question 16

Horizontal analysis:

Accepted Answer

A) Is a method used to evaluate changes in financial data across time. 
B) Is also called vertical analysis. 
C) Is the presentation of financial ratios. 
D) Is a tool used to evaluate financial statement items relative to industry statistics. 
E) Evaluates financial data across industries. 
A) Is a method used to evaluate changes in financial data across time. 
B) Is also called vertical analysis. 
C) Is the presentation of financial ratios. 
D) Is a tool used to evaluate financial statement items relative to industry statistics. 
E) Evaluates financial data across industries.

Question 17

Refer to the following selected financial information from Dodge Company.Compute the company's acid-test ratio.

Accepted Answer

A) 2.75. 
B) 2.66. 
C) 0.92. 
D) 1.12. 
E) 1.63. 
A) 2.75. 
B) 2.66. 
C) 0.92. 
D) 1.12. 
E) 1.63.

Question 18

Refer to the following selected financial information from Shakley's Incorporated.Compute the company's debt-to-equity ratio for Year 2.

Accepted Answer

A) 1.75. 
B) 2.34. 
C) 0.75. 
D) 1.34. 
E) 2.63. 
A) 1.75. 
B) 2.34. 
C) 0.75. 
D) 1.34. 
E) 2.63.

Question 19

Refer to the following selected financial information from Shakley's Incorporated.Compute the company's times interest earned for Year 2.

Accepted Answer

A) 6.9. 
B) 4.8. 
C) 5.8. 
D) 14.0. 
E) 7.9. 
A) 6.9. 
B) 4.8. 
C) 5.8. 
D) 14.0. 
E) 7.9.

Question 20

Use the balance sheets of Glover shown below to calculate the following ratios for 2016 (round to the hundredths):
(a)Current ratio.
(b)Acid-test ratio.
(c)Debt ratio.
(d)Equity ratio.

Accepted Answer

The answer of Use the balance sheets of Glover shown...

Exam 17: Analysis of Financial Statements

Profitability is the ability to generate future revenues and meet long-term obligations.

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

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

Comparative calendar year financial data for a company are shown below.Calculate the following ratios for 2016: (a)return on total assets (b)return on common stockholders' equity.

The greater the times interest earned ratio,the greater the risk a company is exposed to.

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________________________.

Net sales divided by average total assets is the:

Earnings per share are calculated only on income from continuing operations.

Selected balances from a company's financial statements are shown below.Calculate the following ratios for 2016: (a)accounts receivable turnover (b)inventory turnover (c)days' sales uncollected (d)days' sales in inventory (d)profit margin (e)return on total assets.

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

If a company is comparing this year's financial performance to last year's financial performance,it is using horizontal analysis.

Clairmont Industries reported Net income of $283,000 and average Total assets of $637,000.The Return on total assets is:

For the following financial statement items,calculate trend percentages using 2014 as the base year:

A component of operating efficiency and profitability,calculated by expressing net income as a percent of net sales,is the:

Financial analysis only refers to the communication of relevant financial information to decision makers.

Horizontal analysis:

Refer to the following selected financial information from Dodge Company.Compute the company's acid-test ratio.

Refer to the following selected financial information from Shakley's Incorporated.Compute the company's debt-to-equity ratio for Year 2.

Refer to the following selected financial information from Shakley's Incorporated.Compute the company's times interest earned for Year 2.

Use the balance sheets of Glover shown below to calculate the following ratios for 2016 (round to the hundredths): (a)Current ratio. (b)Acid-test ratio. (c)Debt ratio. (d)Equity ratio.

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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