Question 1

In a common size balance sheet, each item on the balance sheet is expressed as a percentage of:

Accepted Answer

A)  total assets. 
B)  total liabilities. 
C)  net income. 
D)  total stockholders' equity. 
A)  total assets. 
B)  total liabilities. 
C)  net income. 
D)  total stockholders' equity.

Question 2

Which of the following ratios is used to evaluate a company's liquidity?

Accepted Answer

A)  Debt-to-assets ratio 
B)  Fixed asset turnover ratio 
C)  Return on equity ratio 
D)  Current ratio 
A)  Debt-to-assets ratio 
B)  Fixed asset turnover ratio 
C)  Return on equity ratio 
D)  Current ratio

Question 3

Which of the following measures would assist in assessing the profitability of a company?

Accepted Answer

A)  Fixed asset turnover 
B)  Times interest earned ratio 
C)  Inventory turnover ratio 
D)  Debt-to-assets ratio 
A)  Fixed asset turnover 
B)  Times interest earned ratio 
C)  Inventory turnover ratio 
D)  Debt-to-assets ratio

Question 4

If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered?

Accepted Answer

A)  Liquidity 
B)  Market share 
C)  Profitability 
D)  Solvency 
A)  Liquidity 
B)  Market share 
C)  Profitability 
D)  Solvency

Question 5

The income statements for Urban Outfits, Inc. are presented below:   Required:
Part a. Prepare a horizontal analysis of the income statement above. Round to the nearest whole percent.
Part b. Interpret your analysis. Comment on significant changes.

Accepted Answer

Part a @#IMG-DLM& Part b
Sales increased by 7% but

Question 6

If cost of goods sold remains unchanged, an increase in the inventory turnover ratio is indicative of a(n):

Accepted Answer

A)  reduction in the cost of goods sold. 
B)  decrease in inventory. 
C)  increase in inventory. 
D)  increase in sales revenue. 
A)  reduction in the cost of goods sold. 
B)  decrease in inventory. 
C)  increase in inventory. 
D)  increase in sales revenue.

Question 7

A company had 10,000 shares of common stock outstanding throughout the year. The following information is also available:   Required:
Calculate the Price/Earnings ratio at the end of the current year.

Accepted Answer

EPS = Net income/Average commo

Question 8

Which of the following is calculated by dividing net revenue by average net fixed assets?

Accepted Answer

A)  Net profit margin 
B)  Fixed asset turnover 
C)  Total asset turnover 
D)  Current ratio 
A)  Net profit margin 
B)  Fixed asset turnover 
C)  Total asset turnover 
D)  Current ratio

Question 9

The following information is taken from the financial statements ofB. Darin Company:
   Expenses include interest of $10,000 and income tax of $90,000. There was an average of 40,000 shares of common stock outstanding during the year and the market price of the stock is $15 per share at the end of the year. There was no preferred stock outstanding during the year.
Required:
Calculate the following ratios for the current year:
Part a. Fixed asset turnover
Part b. Return on equity (ROE)
Part c. Earnings per share (EPS)
Part d. Times interest earned
Part e. Price/Earnings ratio
Part f. Debt-to-assets ratio
Part g. Net profit margin

Accepted Answer

Part a
Average total assets = ($600,000

Question 10

The going-concern assumption is also known as the continuity assumption

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Accepted Answer

A)  Return on assets ratio 
B)  Return on equity ratio 
C)  Earnings per share 
D)  Net profit margin ratio 
A)  Return on assets ratio 
B)  Return on equity ratio 
C)  Earnings per share 
D)  Net profit margin ratio

Question 12

Which of the following statements about trend analysis is correct?

Accepted Answer

A)  Time-series analysis is an example of trend analysis. 
B)  Trend data are always in dollars. 
C)  Trend analysis is also known as vertical analysis. 
D)  Common-size analysis is an example of trend analysis. 
A)  Time-series analysis is an example of trend analysis. 
B)  Trend data are always in dollars. 
C)  Trend analysis is also known as vertical analysis. 
D)  Common-size analysis is an example of trend analysis.

Question 13

Which of the following ratios is a solvency ratio?

Accepted Answer

A)  Net profit margin ratio 
B)  Current ratio 
C)  Fixed asset turnover ratio 
D)  Debt-to-assets ratio 
A)  Net profit margin ratio 
B)  Current ratio 
C)  Fixed asset turnover ratio 
D)  Debt-to-assets ratio

Question 14

The principle that requires companies to include notes to their financial statements is the:

Accepted Answer

A)  full disclosure principle. 
B)  going-concern principle. 
C)  cost-benefit principle. 
D)  historical cost principle. 
A)  full disclosure principle. 
B)  going-concern principle. 
C)  cost-benefit principle. 
D)  historical cost principle.

Question 15

Horizontal analysis is the comparison of each financial statement amount to another amount on the same financial statement

Accepted Answer

A) True 
 B)False

Question 16

The higher the times interest earned ratio, the greater the risk of nonpayment of interest

Accepted Answer

A) True 
 B)False

Question 17

The assumption that a business is capable of continuing its operations long enough to meet its obligations is called the:

Accepted Answer

A)  solvency assumption. 
B)  going-concern assumption. 
C)  profitability assumption. 
D)  liquidity assumption. 
A)  solvency assumption. 
B)  going-concern assumption. 
C)  profitability assumption. 
D)  liquidity assumption.

Question 18

The fixed asset turnover ratio is a profitability ratio

Accepted Answer

A) True 
 B)False

Question 19

If earnings per share (EPS) decreases, it must mean that the company's net income has fallen

Accepted Answer

A) True 
 B)False

Question 20

A current ratio of less than one is not so much of a concern when the company has a:

Accepted Answer

A)  low fixed asset turnover ratio. 
B)  high days to collect number. 
C)  high inventory turnover ratio. 
D)  high debt-to-equity ratio. 
A)  low fixed asset turnover ratio. 
B)  high days to collect number. 
C)  high inventory turnover ratio. 
D)  high debt-to-equity ratio.

In a common size balance sheet, each item on the balance sheet is expressed as a percentage of:

Which of the following ratios is used to evaluate a company's liquidity?

Which of the following measures would assist in assessing the profitability of a company?

If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered?

The income statements for Urban Outfits, Inc. are presented below: Required: Part a. Prepare a horizontal analysis of the income statement above. Round to the nearest whole percent. Part b. Interpret your analysis. Comment on significant changes.

If cost of goods sold remains unchanged, an increase in the inventory turnover ratio is indicative of a(n):

A company had 10,000 shares of common stock outstanding throughout the year. The following information is also available: Required: Calculate the Price/Earnings ratio at the end of the current year.

Which of the following is calculated by dividing net revenue by average net fixed assets?

The going-concern assumption is also known as the continuity assumption

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Which of the following statements about trend analysis is correct?

Which of the following ratios is a solvency ratio?

The principle that requires companies to include notes to their financial statements is the:

Horizontal analysis is the comparison of each financial statement amount to another amount on the same financial statement

The higher the times interest earned ratio, the greater the risk of nonpayment of interest

The assumption that a business is capable of continuing its operations long enough to meet its obligations is called the:

The fixed asset turnover ratio is a profitability ratio

If earnings per share (EPS) decreases, it must mean that the company's net income has fallen

A current ratio of less than one is not so much of a concern when the company has a:

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

In a common size balance sheet, each item on the balance sheet is expressed as a percentage of:

Which of the following ratios is used to evaluate a company's liquidity?

Which of the following measures would assist in assessing the profitability of a company?

If an analyst wants to examine a company's short-run ability to survive, which of the following would best be considered?

The income statements for Urban Outfits, Inc. are presented below: Required: Part a. Prepare a horizontal analysis of the income statement above. Round to the nearest whole percent. Part b. Interpret your analysis. Comment on significant changes.

If cost of goods sold remains unchanged, an increase in the inventory turnover ratio is indicative of a(n):

A company had 10,000 shares of common stock outstanding throughout the year. The following information is also available: Required: Calculate the Price/Earnings ratio at the end of the current year.

Which of the following is calculated by dividing net revenue by average net fixed assets?

The going-concern assumption is also known as the continuity assumption

Which of the following is calculated by dividing (net income less preferred dividends) by average common stockholders' equity?

Which of the following statements about trend analysis is correct?

Which of the following ratios is a solvency ratio?

The principle that requires companies to include notes to their financial statements is the:

Horizontal analysis is the comparison of each financial statement amount to another amount on the same financial statement

The higher the times interest earned ratio, the greater the risk of nonpayment of interest

The assumption that a business is capable of continuing its operations long enough to meet its obligations is called the:

The fixed asset turnover ratio is a profitability ratio

If earnings per share (EPS) decreases, it must mean that the company's net income has fallen

A current ratio of less than one is not so much of a concern when the company has a:

Introduction to Managerial Accounting

Job-Order Costing

Process Costing

Activity-Based Cost Management

Cost Behavior and Estimation

Cost-Volume-Profit Analysis

Incremental Analysis for Short-Term Decision Making

Budgeting and Planning

Standard Costing and Variances

Decentralized Performance Evaluation

Capital Budgeting

Statement of Cash Flows

Filters