Question 1

Which of the following would appear as an extraordinary item on the income statement?

Accepted Answer

A)  loss resulting from the sale of fixed assets 
B)  gain resulting from the disposal of a segment of the business 
C)  loss from land condemned for public use 
D)  liquidating dividend 
A)  loss resulting from the sale of fixed assets 
B)  gain resulting from the disposal of a segment of the business 
C)  loss from land condemned for public use 
D)  liquidating dividend

Question 2

Match each ratio that follows to its use items a-h). Items may be used more than once.
-current ratio

Accepted Answer

A) assess the profitability of the assets 
B) assess the effectiveness in the use of assets 
C) indicate the ability to meet currently maturing obligations 
D) indicate the margin of safety to creditors 
E) indicate instant debt-paying ability
F)assess the profitability of the investment by common stockholders
G)indicate future earnings prospects
H)indicate the extent to which earnings are being distributed to common stockholders 
A) assess the profitability of the assets 
B) assess the effectiveness in the use of assets 
C) indicate the ability to meet currently maturing obligations 
D) indicate the margin of safety to creditors 
E) indicate instant debt-paying ability
F)assess the profitability of the investment by common stockholders
G)indicate future earnings prospects
H)indicate the extent to which earnings are being distributed to common stockholders

Question 3

On a common-sized balance sheet, 100% is

Accepted Answer

A)  total property, plant, and equipment 
B)  total current assets 
C)  total liabilities 
D)  total assets 
A)  total property, plant, and equipment 
B)  total current assets 
C)  total liabilities 
D)  total assets

Question 4

An extraordinary item must be either unusual in nature or infrequent in occurrence.

Accepted Answer

A) True 
 B)False

Question 5

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Accepted Answer

A) True 
 B)False

Question 6

The relationship of $325,000 to $125,000, expressed as a ratio, is

Accepted Answer

A)  2.0 
B)  2.6 
C)  2.5 
D)  0.45 
A)  2.0 
B)  2.6 
C)  2.5 
D)  0.45

Question 7

In horizontal analysis, the current year is the base year.

Accepted Answer

A) True 
 B)False

Question 8

Revenue and expense data for Young Technologies are as follows:   a) Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round to the nearest whole percent.
b) Comment on the significant changes disclosed by the comparative income statement.

Accepted Answer

a)Young Technologies Inc. Comparative In

Question 9

A balance sheet that displays only component percentages is a

Accepted Answer

A)  trend balance sheet 
B)  comparative balance sheet 
C)  condensed balance sheet 
D)  common-sized balance sheet 
A)  trend balance sheet 
B)  comparative balance sheet 
C)  condensed balance sheet 
D)  common-sized balance sheet

Question 10

Which of the following is the most useful in analyzing companies of different sizes?

Accepted Answer

A)  comparative statements 
B)  common-sized financial statements 
C)  price-level accounting 
D)  audit report 
A)  comparative statements 
B)  common-sized financial statements 
C)  price-level accounting 
D)  audit report

Question 11

Comparable financial statements are designed to compare the financial statements of two or more corporations.

Accepted Answer

A) True 
 B)False

Question 12

-Based on the above data, what is the amount of quick assets?

Accepted Answer

A)  $205,000 
B)  $203,000 
C)  $131,000 
D)  $66,000 
A)  $205,000 
B)  $203,000 
C)  $131,000 
D)  $66,000

Question 13

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Accepted Answer

A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity 
A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity

Question 14

A company reports the following:
Cost of goods sold $610,000
Average inventory 80,000
Determine the a) inventory turnover, and b) number of days' sales in inventory. Round your answer to one decimal place.

Accepted Answer

a) Inventory turnover = Cost of goods so

Question 15

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

Accepted Answer

A) True 
 B)False

Question 16

In a common-sized income statement, each item is expressed as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 17

A loss due to a discontinued operation should be reported on the income statement

Accepted Answer

A)  above income from continuing operations 
B)  without related tax effect 
C)  below income from continuing operations 
D)  as an operating expense 
A)  above income from continuing operations 
B)  without related tax effect 
C)  below income from continuing operations 
D)  as an operating expense

Question 18

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

Accepted Answer

A)  ratio of fixed assets to long-term liabilities 
B)  ratio of net sales to assets 
C)  number of days' sales in receivables 
D)  rate earned on stockholders' equity 
A)  ratio of fixed assets to long-term liabilities 
B)  ratio of net sales to assets 
C)  number of days' sales in receivables 
D)  rate earned on stockholders' equity

Question 19

The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

Accepted Answer

A) True 
 B)False

Question 20

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

Accepted Answer

A) True 
 B)False

Exam 15: Financial Statement Analysis

Which of the following would appear as an extraordinary item on the income statement?

Match each ratio that follows to its use items a-h). Items may be used more than once. -current ratio

On a common-sized balance sheet, 100% is

An extraordinary item must be either unusual in nature or infrequent in occurrence.

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

The relationship of $325,000 to $125,000, expressed as a ratio, is

In horizontal analysis, the current year is the base year.

A balance sheet that displays only component percentages is a

Which of the following is the most useful in analyzing companies of different sizes?

Comparable financial statements are designed to compare the financial statements of two or more corporations.

-Based on the above data, what is the amount of quick assets?

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

A company reports the following: Cost of goods sold $610,000 Average inventory 80,000 Determine the a) inventory turnover, and b) number of days' sales in inventory. Round your answer to one decimal place.

Using vertical analysis of the income statement, a company's net income as a percentage of sales is 15%; therefore, the cost of goods sold as a percentage of sales must be 85%.

In a common-sized income statement, each item is expressed as a percentage of net income.

A loss due to a discontinued operation should be reported on the income statement

Which of the following ratios provides a solvency measure that shows the margin of safety of bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long-term basis?

The report on internal control required by the Sarbanes-Oxley Act of 2002 may be prepared by either management or the company's auditors.

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

Introduction to Accounting and Business

Analyzing Transactions

The Adjusting Process

Completing the Accounting Cycle

Accounting for Merchandising Businesses

Inventories

Sarbanes-Oxley, Internal Control, and Cash

Receivables

Fixed Assets and Intangible Assets

Current Liabilities and Payroll

Corporations: Organization, Stock Transactions, and Dividends

Long-Term Liabilities: Bonds and Notes

Investments and Fair Value Accounting

Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Cost Systems

Cost Behavior and Cost-Volume-Profit Analysis

Variable Costing for Management Analysis

Budgeting

Performance Evaluation Using Variances From Standard Costs

Performance Evaluation for Decentralized Operations

Differential Analysis, Product Pricing, and Activity-Based Costing

Capital Investment Analysis

Cost Allocation and Activity-Based Costing

Lean Principles, Lean Accounting, and Activity Analysis

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