Question 1

Stockholders are most interested in evaluating

Accepted Answer

A) liquidity and solvency. 
B) profitability and solvency. 
C) liquidity and profitability. 
D) marketability and solvency. 
A) liquidity and solvency. 
B) profitability and solvency. 
C) liquidity and profitability. 
D) marketability and solvency.

Question 2

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) Acid-test ratio 
C) Asset turnover 
D) Accounts receivable turnover 
A) Current ratio 
B) Acid-test ratio 
C) Asset turnover 
D) Accounts receivable turnover

Question 3

An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.

Accepted Answer

A) True 
 B)False

Question 4

The following amounts were taken from the financial statements of Leaf Company:   The return on assets ratio for 2015 is

Accepted Answer

A) 15.8%. 
B) 15%. 
C) 14.3%. 
D) 14.5%. 
A) 15.8%. 
B) 15%. 
C) 14.3%. 
D) 14.5%.

Question 5

Trading on the equity (leverage) refers to the

Accepted Answer

A) amount of working capital. 
B) amount of capital provided by owners. 
C) use of borrowed money to increase the return to owners. 
D) number of times interest is earned. 
A) amount of working capital. 
B) amount of capital provided by owners. 
C) use of borrowed money to increase the return to owners. 
D) number of times interest is earned.

Question 6

Comparisons of data within a company are an example of the following comparative basis:

Accepted Answer

A) Industry averages 
B) Intercompany 
C) Intracompany 
D) Interregional 
A) Industry averages 
B) Intercompany 
C) Intracompany 
D) Interregional

Question 7

In analyzing the financial statements of a company, a single item on the financial statements

Accepted Answer

A) should be reported in bold-face type. 
B) is more meaningful if compared to other financial information. 
C) is significant only if it is large. 
D) should be accompanied by a footnote. 
A) should be reported in bold-face type. 
B) is more meaningful if compared to other financial information. 
C) is significant only if it is large. 
D) should be accompanied by a footnote.

Question 8

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.   What is the return on assets for Ortiz?

Accepted Answer

A) 6.0% 
B) 5.0% 
C) 10.0% 
D) 12.0% 
A) 6.0% 
B) 5.0% 
C) 10.0% 
D) 12.0%

Question 9

Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $760,000, respectively. The accounts receivable turnover was

Accepted Answer

A) 7.4 times. 
B) 5.9 times. 
C) 11.2 times. 
D) 12.5 times. 
A) 7.4 times. 
B) 5.9 times. 
C) 11.2 times. 
D) 12.5 times.

Question 10

In vertical analysis, the base amount for each income statement item is

Accepted Answer

A) gross profit. 
B) net income. 
C) net sales. 
D) sales. 
A) gross profit. 
B) net income. 
C) net sales. 
D) sales.

Question 11

The acid-test ratio is also known as the

Accepted Answer

A) current ratio. 
B) quick ratio. 
C) fast ratio. 
D) times interest earned ratio. 
A) current ratio. 
B) quick ratio. 
C) fast ratio. 
D) times interest earned ratio.

Question 12

A general rule to use in assessing the average collection period is that

Accepted Answer

A) it should not exceed 30 days. 
B) it can be any length as long as the customer continues to buy merchandise. 
C) it should not greatly exceed the discount period. 
D) it should not greatly exceed the credit term period. 
A) it should not exceed 30 days. 
B) it can be any length as long as the customer continues to buy merchandise. 
C) it should not greatly exceed the discount period. 
D) it should not greatly exceed the credit term period.

Question 13

The current ratio is a measure of all the ratios calculated for the current year.

Accepted Answer

A) True 
 B)False

Question 14

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit.   What is the current ratio for Ortiz?

Accepted Answer

A) 1.90 
B) 1.50 
C) 1.30 
D) .53 
A) 1.90 
B) 1.50 
C) 1.30 
D) .53

Question 15

The current assets of Myers Company are $250,000. The current liabilities are $100,000. The current ratio expressed as a proportion is

Accepted Answer

A) 250%. 
B) 2.5 : 1 
C) .25 : 1 
D) $250,000 ÷ $100,000. 
A) 250%. 
B) 2.5 : 1 
C) .25 : 1 
D) $250,000 ÷ $100,000.

Question 16

Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.

Accepted Answer

A) True 
 B)False

Question 17

A successful grocery store would probably have

Accepted Answer

A) a low inventory turnover. 
B) a high inventory turnover. 
C) zero profit margin. 
D) low volume. 
A) a low inventory turnover. 
B) a high inventory turnover. 
C) zero profit margin. 
D) low volume.

Question 18

All of the following statements regarding changes in accounting principles are true except:

Accepted Answer

A) Most changes in accounting principles are only reported in current periods when the principle change takes place. 
B) Changes in accounting principles are allowed when new principles are preferable to old ones. 
C) Most changes in accounting principles are retroactively reported. 
D) Consistency is one of the biggest concerns when a change in accounting principle is undertaken. 
A) Most changes in accounting principles are only reported in current periods when the principle change takes place. 
B) Changes in accounting principles are allowed when new principles are preferable to old ones. 
C) Most changes in accounting principles are retroactively reported. 
D) Consistency is one of the biggest concerns when a change in accounting principle is undertaken.

Question 19

The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

Accepted Answer

A) True 
 B)False

Question 20

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed.

Accepted Answer

A) True 
 B)False

Stockholders are most interested in evaluating

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?

An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.

The following amounts were taken from the financial statements of Leaf Company: The return on assets ratio for 2015 is

Trading on the equity (leverage) refers to the

Comparisons of data within a company are an example of the following comparative basis:

In analyzing the financial statements of a company, a single item on the financial statements

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on assets for Ortiz?

Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $760,000, respectively. The accounts receivable turnover was

In vertical analysis, the base amount for each income statement item is

The acid-test ratio is also known as the

A general rule to use in assessing the average collection period is that

The current ratio is a measure of all the ratios calculated for the current year.

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for Ortiz?

The current assets of Myers Company are $250,000. The current liabilities are $100,000. The current ratio expressed as a proportion is

Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.

A successful grocery store would probably have

All of the following statements regarding changes in accounting principles are true except:

The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Filters

Exam 14: Financial Statement Analysis

Stockholders are most interested in evaluating

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?

An event or transaction should be classified as an extraordinary item if it is unusual in nature or if it occurs infrequently.

The following amounts were taken from the financial statements of Leaf Company: The return on assets ratio for 2015 is

Trading on the equity (leverage) refers to the

Comparisons of data within a company are an example of the following comparative basis:

In analyzing the financial statements of a company, a single item on the financial statements

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the return on assets for Ortiz?

Fess Hardware Store had net credit sales of $8,500,000 and cost of goods sold of $5,000,000 for the year. The Accounts Receivable balances at the beginning and end of the year were $600,000 and $760,000, respectively. The accounts receivable turnover was

In vertical analysis, the base amount for each income statement item is

The acid-test ratio is also known as the

A general rule to use in assessing the average collection period is that

The current ratio is a measure of all the ratios calculated for the current year.

The following information pertains to Ortiz Company. Assume that all balance sheet amounts represent both average and ending balance figures. Assume that all sales were on credit. What is the current ratio for Ortiz?

The current assets of Myers Company are $250,000. The current liabilities are $100,000. The current ratio expressed as a proportion is

Calculating financial ratios is a financial reporting requirement under generally accepted accounting principles.

A successful grocery store would probably have

All of the following statements regarding changes in accounting principles are true except:

The rate of return on total assets will be greater than the rate of return on common stockholders' equity if the company has been successful in trading on the equity at a gain.

In horizontal analysis, if an item has a negative amount in the base year, and a positive amount in the following year, no percentage change for that item can be computed.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Liabilities

Corporations: Organization, Stock Transactions, Dividends, and Retained Earnings

Investments

Statement of Cash Flows

Filters