Question 1

Vertical analysis is useful in making comparisons of companies of different sizes.

Accepted Answer

A) True 
 B)False

Question 2

If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always

Accepted Answer

A) increase. 
B) decrease. 
C) stay the same. 
D) equal zero. 
A) increase. 
B) decrease. 
C) stay the same. 
D) equal zero.

Question 3

In horizontal analysis, each item is expressed as a percentage of the

Accepted Answer

A) net income amount. 
B) stockholders' equity amount. 
C) total assets amount. 
D) base-year amount. 
A) net income amount. 
B) stockholders' equity amount. 
C) total assets amount. 
D) base-year amount.

Question 4

All of the following situtations below might indicate a company has a low quality of earnings except

Accepted Answer

A) A lack of disclosure about guaranteed payments that were mentioned in the MD&A of the annual report. 
B) Maintenance costs are capitalized and then depreciated. 
C) Revenue is recognized when earned. 
D) Adoption of a different inventory method for each of the last three years. 
A) A lack of disclosure about guaranteed payments that were mentioned in the MD&A of the annual report. 
B) Maintenance costs are capitalized and then depreciated. 
C) Revenue is recognized when earned. 
D) Adoption of a different inventory method for each of the last three years.

Question 5

An income statement would not include

Accepted Answer

A) other revenue and gains. 
B) income from operations. 
C) discontinued operations. 
D) dividends paid. 
A) other revenue and gains. 
B) income from operations. 
C) discontinued operations. 
D) dividends paid.

Question 6

Under which of the following cases may a percentage change be computed?

Accepted Answer

A) The trend of the amounts is decreasing but all amounts are positive. 
B) There is no amount in the base year. 
C) There is a negative amount in the base year and a negative amount in the subsequent year. 
D) There is a negative amount in the base year and a positive amount in the subsequent year. 
A) The trend of the amounts is decreasing but all amounts are positive. 
B) There is no amount in the base year. 
C) There is a negative amount in the base year and a negative amount in the subsequent year. 
D) There is a negative amount in the base year and a positive amount in the subsequent year.

Question 7

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Accepted Answer

A) Current ratio 
B) Inventory turnover 
C) Asset turnover 
D) Accounts receivable turnover 
A) Current ratio 
B) Inventory turnover 
C) Asset turnover 
D) Accounts receivable turnover

Question 8

Which of the following items appears on the income statement before income before income taxes?

Accepted Answer

A) Other comprehensive income. 
B) Comprehensive income. 
C) Other revenues and gains. 
D) Discontinued operations. 
A) Other comprehensive income. 
B) Comprehensive income. 
C) Other revenues and gains. 
D) Discontinued operations.

Question 9

Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The average collection period of the accounts receivable in terms of days was

Accepted Answer

A) 30 days. 
B) 81.1 days. 
C) 42.4 days. 
D) 40.6 days. 
A) 30 days. 
B) 81.1 days. 
C) 42.4 days. 
D) 40.6 days.

Question 10

A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.

Accepted Answer

A) True 
 B)False

Question 11

The order of presentation of items that may appear on the statement income of comprehensive income is

Accepted Answer

A) Other comprehensive income, Discontinued operations, Income before income taxes. 
B) Discontinued operations, Other comprehensive income, Income before income taxes. 
C) Income before income taxes, Discontinued operations, Other comprehensive income. 
D) Income before income taxes, Other comprehensive income, Discontinued operations. 
A) Other comprehensive income, Discontinued operations, Income before income taxes. 
B) Discontinued operations, Other comprehensive income, Income before income taxes. 
C) Income before income taxes, Discontinued operations, Other comprehensive income. 
D) Income before income taxes, Other comprehensive income, Discontinued operations.

Question 12

Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by stockholders and distributions to stockholders.

Accepted Answer

A) True 
 B)False

Question 13

Akers Corporation reported net income $36,000; net sales $480,000; and average assets $800,000 for 2017. What is the 2017 profit margin?

Accepted Answer

A) 4.5% 
B) 7.5% 
C) 13.3% 
D) 60.0% 
A) 4.5% 
B) 7.5% 
C) 13.3% 
D) 60.0%

Question 14

Companies report most changes in accounting principle currently.

Accepted Answer

A) True 
 B)False

Question 15

Declining profitability and liquidity ratios are indications that a company may not survive.

Accepted Answer

A) True 
 B)False

Question 16

A common measure of profitability is the

Accepted Answer

A) current ratio. 
B) times interest earned. 
C) return on common stockholders' equity. 
D) debt to assets. 
A) current ratio. 
B) times interest earned. 
C) return on common stockholders' equity. 
D) debt to assets.

Question 17

The disposal of a significant component of a business is called

Accepted Answer

A) a change in accounting principle. 
B) comprehensive income. 
C) an other expense. 
D) discontinued operations. 
A) a change in accounting principle. 
B) comprehensive income. 
C) an other expense. 
D) discontinued operations.

Question 18

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The average collection period of the receivables in terms of days was

Accepted Answer

A) 36.1 days. 
B) 38.4 days. 
C) 37.2 days. 
D) 4 days. 
A) 36.1 days. 
B) 38.4 days. 
C) 37.2 days. 
D) 4 days.

Question 19

Which situation below might indicate a company has a low quality of earnings?

Accepted Answer

A) Revenue is recorded when recognized 
B) Repair costs are capitalized and then depreciated. 
C) The financial statements are prepared in accordance with generally accepted accounting principles. 
D) The same accounting principles are used each year. 
A) Revenue is recorded when recognized 
B) Repair costs are capitalized and then depreciated. 
C) The financial statements are prepared in accordance with generally accepted accounting principles. 
D) The same accounting principles are used each year.

Question 20

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The accounts receivable turnover was

Accepted Answer

A) 9.5 times. 
B) 10.1 times. 
C) 8.9 times. 
D) 9.8 times. 
A) 9.5 times. 
B) 10.1 times. 
C) 8.9 times. 
D) 9.8 times.

Exam 12: Financial Analysis: The Big Picture

Vertical analysis is useful in making comparisons of companies of different sizes.

If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, the ratio will always

In horizontal analysis, each item is expressed as a percentage of the

All of the following situtations below might indicate a company has a low quality of earnings except

An income statement would not include

Under which of the following cases may a percentage change be computed?

Which one of the following ratios would not likely be used by a short-term creditor in evaluating whether to sell on credit to a company?

Which of the following items appears on the income statement before income before income taxes?

Winsor Clothing Store had a balance in the Accounts Receivable account of $760,000 at the beginning of the year and a balance of $840,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The average collection period of the accounts receivable in terms of days was

A current ratio of 1.2 to 1 indicates that a company's current assets exceed its current liabilities.

The order of presentation of items that may appear on the statement income of comprehensive income is

Comprehensive income includes all changes in stockholders' equity during a period except those resulting from investments by stockholders and distributions to stockholders.

Akers Corporation reported net income $36,000; net sales $480,000; and average assets $800,000 for 2017. What is the 2017 profit margin?

Companies report most changes in accounting principle currently.

Declining profitability and liquidity ratios are indications that a company may not survive.

A common measure of profitability is the

The disposal of a significant component of a business is called

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The average collection period of the receivables in terms of days was

Which situation below might indicate a company has a low quality of earnings?

Hickory Hills Pro Shop had a balance in the Accounts Receivable account of $800,000 at the beginning of the year and a balance of $900,000 at the end of the year. Net credit sales during the year amounted to $8,040,000. The accounts receivable turnover was

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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