Question 1

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Accepted Answer

A)  previous period amount from the current amount. 
B)  current period amount from the previous period amount. 
C)  current period amount from the previous period amount and then dividing the result by the previous period amount. 
D)  previous period amount from the current period amount and then dividing the result by the current period amount. 
A)  previous period amount from the current amount. 
B)  current period amount from the previous period amount. 
C)  current period amount from the previous period amount and then dividing the result by the previous period amount. 
D)  previous period amount from the current period amount and then dividing the result by the current period amount.

Question 2

Which of the following is a profitability ratio?

Accepted Answer

A)  Return on equity 
B)  Times interest earned 
C)  Inventory turnover 
D)  Receivables turnover 
A)  Return on equity 
B)  Times interest earned 
C)  Inventory turnover 
D)  Receivables turnover

Question 3

A times interest earned ratio of 11 means that the company's:

Accepted Answer

A)  net income is large enough to pay interest and taxes 11 times. 
B)  net cash flow from operations before taxes and interest is large enough to pay interest and taxes 11 times. 
C)  net cash flow from operations is large enough to pay interest and taxes 11 times. 
D)  income before taxes and interest is large enough to pay interest 11 times. 
A)  net income is large enough to pay interest and taxes 11 times. 
B)  net cash flow from operations before taxes and interest is large enough to pay interest and taxes 11 times. 
C)  net cash flow from operations is large enough to pay interest and taxes 11 times. 
D)  income before taxes and interest is large enough to pay interest 11 times.

Question 4

Assume that Charmin and Barker are two retailers selling different goods. Charmin reports a days to sell ratio of 6 and Barker reports a days to sell ratio of 64. What types of merchandise are Charmin and Barker likely to sell, given their measures of days to sell?

Accepted Answer

A)  Charmin sells clothing and Barker sells wine. 
B)  Charmin sells consumer electronics and Barker sells gasoline. 
C)  Charmin sells footwear and Barker sells consumer electronics. 
D)  Charmin sells groceries and Barker sells autos. 
A)  Charmin sells clothing and Barker sells wine. 
B)  Charmin sells consumer electronics and Barker sells gasoline. 
C)  Charmin sells footwear and Barker sells consumer electronics. 
D)  Charmin sells groceries and Barker sells autos.

Question 5

Vertical analysis:

Accepted Answer

A)  identifies the relative contribution made by each financial statement line item. 
B)  identifies trends over time. 
C)  provides an understanding of the relationships among various items on financial statements by expressing the differences in terms of dollars. 
D)  involves comparing amounts across different financial statements. 
A)  identifies the relative contribution made by each financial statement line item. 
B)  identifies trends over time. 
C)  provides an understanding of the relationships among various items on financial statements by expressing the differences in terms of dollars. 
D)  involves comparing amounts across different financial statements.

Question 6

Which of the following ratios does not use net income in its calculation?

Accepted Answer

A)  Net profit margin 
B)  Earnings per share 
C)  Return on equity 
D)  Fixed asset turnover 
A)  Net profit margin 
B)  Earnings per share 
C)  Return on equity 
D)  Fixed asset turnover

Question 7

Puffin Turnovers, Inc.'s fixed asset turnover was 0.9 while Muffin Tops, Inc.'s fixed asset turnover was 0.6. Which of the following statements about Puffin compared with Muffin is correct?

Accepted Answer

A)  Puffin generated more sales per dollar of fixed assets. 
B)  Puffin has greater depreciation expense. 
C)  Puffin has more fixed assets. 
D)  Puffin has greater sales. 
A)  Puffin generated more sales per dollar of fixed assets. 
B)  Puffin has greater depreciation expense. 
C)  Puffin has more fixed assets. 
D)  Puffin has greater sales.

Question 8

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

Accepted Answer

A)  Net profit margin 
B)  Fixed asset turnover 
C)  Current ratio 
D)  Return on assets 
A)  Net profit margin 
B)  Fixed asset turnover 
C)  Current ratio 
D)  Return on assets

Question 9

A decrease in receivables turnover ratio is indicative of:

Accepted Answer

A)  an increase in sales revenue. 
B)  slower-selling inventory. 
C)  an increase in accounts receivable. 
D)  a decline in cost of goods solD.
Receivable turnover = Net sales ÷ Average net receivables 
A)  an increase in sales revenue. 
B)  slower-selling inventory. 
C)  an increase in accounts receivable. 
D)  a decline in cost of goods solD.
Receivable turnover = Net sales ÷ Average net receivables

Question 10

Solvency ratio data are primarily concerned with the ability of a company to:

Accepted Answer

A)  produce profits. 
B)  maintain long-term survival and repay its debt. 
C)  manage its cash flow. 
D)  provide income for stockholders. 
A)  produce profits. 
B)  maintain long-term survival and repay its debt. 
C)  manage its cash flow. 
D)  provide income for stockholders.

Question 11

A debt-to-assets ratio of 0.50 indicates that the company has:

Accepted Answer

A)  more liabilities than stockholders' equity. 
B)  equal amounts of liabilities and stockholders' equity. 
C)  more stockholders' equity than liabilities. 
D)  no liabilities. 
A)  more liabilities than stockholders' equity. 
B)  equal amounts of liabilities and stockholders' equity. 
C)  more stockholders' equity than liabilities. 
D)  no liabilities.

Question 12

Company X has net sales revenue of $1,250,000, cost of goods sold of $760,000, and all other expenses of $290,000. The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000. The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000.
Required:
Compute the return on equity (ROE) ratio.

Accepted Answer

@#IMG-DLM& Average stockholders' equity = (Beginni

Question 13

Which of the following could indicate bad news?

Accepted Answer

A)  An increase in fixed asset turnover ratio 
B)  A decrease in days to sell 
C)  A decrease in EPS 
D)  A decrease in the debt-to-assets ratio 
A)  An increase in fixed asset turnover ratio 
B)  A decrease in days to sell 
C)  A decrease in EPS 
D)  A decrease in the debt-to-assets ratio

Question 14

According to the full disclosure principle, financial reports should present detailed information about every transaction

Accepted Answer

A) True 
 B)False

Question 15

Which ratio is used to evaluate how well a company is managing its property, plant, and equipment?

Accepted Answer

A)  Receivables turnover 
B)  Inventory turnover 
C)  Fixed asset turnover 
D)  Asset turnover 
A)  Receivables turnover 
B)  Inventory turnover 
C)  Fixed asset turnover 
D)  Asset turnover

Question 16

Liquidity measures the ability of a company to meet its current financial obligations

Accepted Answer

A) True 
 B)False

Question 17

The full disclosure principle refers to:

Accepted Answer

A)  Financial reports should disclose only material transactions related to a company's business activities. 
B)  Financial reports should disclose every transaction related to a company's business activities. 
C)  Financial reports should present all information needed to properly interpret results of a company's business activities. 
D)  Financial reports should disclose all future transactions related to a company's business activities. 
A)  Financial reports should disclose only material transactions related to a company's business activities. 
B)  Financial reports should disclose every transaction related to a company's business activities. 
C)  Financial reports should present all information needed to properly interpret results of a company's business activities. 
D)  Financial reports should disclose all future transactions related to a company's business activities.

Question 18

Which of these are solvency ratios?

Accepted Answer

A)  Debt-to-assets 
B)  Current ratio 
C)  Return on equity 
D)  Net profit margin 
A)  Debt-to-assets 
B)  Current ratio 
C)  Return on equity 
D)  Net profit margin

Question 19

Westcott, Inc. has the following information from its accounting records:   If Westcott uses cash of $5,000 to pay a current liability, its:

Accepted Answer

A)  current ratio increases and its debt-to-assets ratio increases 
B)  current ratio increases and its debt-to-assets ratio decreases 
C)  current ratio decreases and its debt-to-assets ratio increases 
D)  current ratio decreases and its debt-to-assets ratio decreases 
A)  current ratio increases and its debt-to-assets ratio increases 
B)  current ratio increases and its debt-to-assets ratio decreases 
C)  current ratio decreases and its debt-to-assets ratio increases 
D)  current ratio decreases and its debt-to-assets ratio decreases

Question 20

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

Accepted Answer

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

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Which of the following is a profitability ratio?

A times interest earned ratio of 11 means that the company's:

Assume that Charmin and Barker are two retailers selling different goods. Charmin reports a days to sell ratio of 6 and Barker reports a days to sell ratio of 64. What types of merchandise are Charmin and Barker likely to sell, given their measures of days to sell?

Vertical analysis:

Which of the following ratios does not use net income in its calculation?

Puffin Turnovers, Inc.'s fixed asset turnover was 0.9 while Muffin Tops, Inc.'s fixed asset turnover was 0.6. Which of the following statements about Puffin compared with Muffin is correct?

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

A decrease in receivables turnover ratio is indicative of:

Solvency ratio data are primarily concerned with the ability of a company to:

A debt-to-assets ratio of 0.50 indicates that the company has:

Which of the following could indicate bad news?

According to the full disclosure principle, financial reports should present detailed information about every transaction

Which ratio is used to evaluate how well a company is managing its property, plant, and equipment?

Liquidity measures the ability of a company to meet its current financial obligations

The full disclosure principle refers to:

Which of these are solvency ratios?

Westcott, Inc. has the following information from its accounting records: If Westcott uses cash of $5,000 to pay a current liability, its:

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

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

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Which of the following is a profitability ratio?

A times interest earned ratio of 11 means that the company's:

Assume that Charmin and Barker are two retailers selling different goods. Charmin reports a days to sell ratio of 6 and Barker reports a days to sell ratio of 64. What types of merchandise are Charmin and Barker likely to sell, given their measures of days to sell?

Vertical analysis:

Which of the following ratios does not use net income in its calculation?

Puffin Turnovers, Inc.'s fixed asset turnover was 0.9 while Muffin Tops, Inc.'s fixed asset turnover was 0.6. Which of the following statements about Puffin compared with Muffin is correct?

Net revenue divided by average net fixed assets is the calculation for which of the following ratios?

A decrease in receivables turnover ratio is indicative of:

Solvency ratio data are primarily concerned with the ability of a company to:

A debt-to-assets ratio of 0.50 indicates that the company has:

Which of the following could indicate bad news?

According to the full disclosure principle, financial reports should present detailed information about every transaction

Which ratio is used to evaluate how well a company is managing its property, plant, and equipment?

Liquidity measures the ability of a company to meet its current financial obligations

The full disclosure principle refers to:

Which of these are solvency ratios?

Westcott, Inc. has the following information from its accounting records: If Westcott uses cash of $5,000 to pay a current liability, its:

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

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