Question 1

Another name for trend analysis is horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 2

Swiss Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $780,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The accounts receivable turnover ratio was

Accepted Answer

A) 9.0 times. 
B) 8.4 times. 
C) 9.2 times. 
D) 8.8 times. 
A) 9.0 times. 
B) 8.4 times. 
C) 9.2 times. 
D) 8.8 times.

Question 3

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

Accepted Answer

A) 8 times 
B) 4.0 times 
C) 7.0 times 
D) 3.0 times 
A) 8 times 
B) 4.0 times 
C) 7.0 times 
D) 3.0 times

Question 4

Each of the following is a factor affecting quality of earnings except

Accepted Answer

A) alternative accounting methods. 
B) improper recognition. 
C) pro forma income. 
D) extraordinary items. 
A) alternative accounting methods. 
B) improper recognition. 
C) pro forma income. 
D) extraordinary items.

Question 5

The following financial statement information is available for Buil Corporation:   The current ratio for 2015 is

Accepted Answer

A) .31:1. 
B) 3.2:1. 
C) 1.5:1. 
D) 4.24:1. 
A) .31:1. 
B) 3.2:1. 
C) 1.5:1. 
D) 4.24:1.

Question 6

The acid-test (quick) ratio

Accepted Answer

A) is used to quickly determine a company's solvency and long-term debt paying ability. 
B) relates cash, short-term investments, and net receivables to current liabilities. 
C) is calculated by taking one item from the income statement and one item from the balance sheet. 
D) is the same as the current ratio except it is rounded to the nearest whole percent. 
A) is used to quickly determine a company's solvency and long-term debt paying ability. 
B) relates cash, short-term investments, and net receivables to current liabilities. 
C) is calculated by taking one item from the income statement and one item from the balance sheet. 
D) is the same as the current ratio except it is rounded to the nearest whole percent.

Question 7

Vertical analysis is also known as

Accepted Answer

A) perpendicular analysis. 
B) common size analysis. 
C) trend analysis. 
D) straight-line analysis. 
A) perpendicular analysis. 
B) common size analysis. 
C) trend analysis. 
D) straight-line analysis.

Question 8

Quasar Corporation had net income of $300,000 and paid dividends to common stockholders of $40,000 in 2015. The weighted average number of shares outstanding in 2015 was 60,000 shares. Quasar Corporation's common stock is selling for $35 per share on the New York Stock Exchange. Quasar Corporation's price-earnings ratio is

Accepted Answer

A) 5.7 times. 
B) 7 times. 
C) 14 times. 
D) 8.1 times. 
A) 5.7 times. 
B) 7 times. 
C) 14 times. 
D) 8.1 times.

Question 9

Which one of the following is primarily interested in the liquidity of a company?

Accepted Answer

A) Federal government 
B) Stockholders 
C) Long-term creditors 
D) Short-term creditors 
A) Federal government 
B) Stockholders 
C) Long-term creditors 
D) Short-term creditors

Question 10

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 accounts receivable turnover for Ortiz?

Accepted Answer

A) 1.3 times 
B) 1.1 times 
C) 2.8 times 
D) 12.7 times 
A) 1.3 times 
B) 1.1 times 
C) 2.8 times 
D) 12.7 times

Question 11

The following amounts were taken from the financial statements of Leaf Company:   The price-earnings ratio for 2015 is

Accepted Answer

A) 21.5 times. 
B) 36 times. 
C) 4.5 times. 
D) 3.0 times. 
A) 21.5 times. 
B) 36 times. 
C) 4.5 times. 
D) 3.0 times.

Question 12

Vertical analysis is a technique which expresses each item within a financial statement

Accepted Answer

A) in dollars and cents. 
B) in terms of a percentage of the item in the previous year. 
C) in terms of a percent of a base amount. 
D) starting with the highest value down to the lowest value. 
A) in dollars and cents. 
B) in terms of a percentage of the item in the previous year. 
C) in terms of a percent of a base amount. 
D) starting with the highest value down to the lowest value.

Question 13

Horizontal analysis evaluates financial statement data

Accepted Answer

A) within a period of time. 
B) over a period of time. 
C) on a certain date. 
D) as it may appear in the future. 
A) within a period of time. 
B) over a period of time. 
C) on a certain date. 
D) as it may appear in the future.

Question 14

Net income does not appear in the numerator of the

Accepted Answer

A) profit margin. 
B) return on assets. 
C) return on common stockholders' equity. 
D) payout ratio. 
A) profit margin. 
B) return on assets. 
C) return on common stockholders' equity. 
D) payout ratio.

Question 15

When there has been a change in accounting principle,

Accepted Answer

A) the old principle should be used in reporting the results of operations for the current year. 
B) the cumulative effect of the change should be reported in the current year's retained earnings statement. 
C) the change should be reported retroactively. 
D) the new principle should be used in reporting the results of operations of the current year, but there is no change to prior years. 
A) the old principle should be used in reporting the results of operations for the current year. 
B) the cumulative effect of the change should be reported in the current year's retained earnings statement. 
C) the change should be reported retroactively. 
D) the new principle should be used in reporting the results of operations of the current year, but there is no change to prior years.

Question 16

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Accepted Answer

A) True 
 B)False

Question 17

The formula for horizontal analysis of changes since the base period is the current year amount

Accepted Answer

A) divided by the base year amount. 
B) minus the base year amount divided by the base year amount. 
C) minus the base year amount divided by the current year amount. 
D) plus the base year amount divided by the base year amount. 
A) divided by the base year amount. 
B) minus the base year amount divided by the base year amount. 
C) minus the base year amount divided by the current year amount. 
D) plus the base year amount divided by the base year amount.

Question 18

Horizontal analysis is appropriately performed

Accepted Answer

A) only on the income statement. 
B) only on the balance sheet. 
C) only on the statement of retained earnings. 
D) on all three of these statements. 
A) only on the income statement. 
B) only on the balance sheet. 
C) only on the statement of retained earnings. 
D) on all three of these statements.

Question 19

Extraordinary items are reported net of applicable taxes in a separate section of the income statement.

Accepted Answer

A) True 
 B)False

Question 20

Ratios are used as tools in financial analysis

Accepted Answer

A) instead of horizontal and vertical analyses. 
B) because they may provide information that is not apparent from inspection of the individual components of the ratio. 
C) because even single ratios by themselves are quite meaningful. 
D) because they are prescribed by GAAP. 
A) instead of horizontal and vertical analyses. 
B) because they may provide information that is not apparent from inspection of the individual components of the ratio. 
C) because even single ratios by themselves are quite meaningful. 
D) because they are prescribed by GAAP.

Another name for trend analysis is horizontal analysis.

Swiss Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $780,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The accounts receivable turnover ratio was

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

Each of the following is a factor affecting quality of earnings except

The following financial statement information is available for Buil Corporation: The current ratio for 2015 is

The acid-test (quick) ratio

Vertical analysis is also known as

Which one of the following is primarily interested in the liquidity of a company?

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 accounts receivable turnover for Ortiz?

The following amounts were taken from the financial statements of Leaf Company: The price-earnings ratio for 2015 is

Vertical analysis is a technique which expresses each item within a financial statement

Horizontal analysis evaluates financial statement data

Net income does not appear in the numerator of the

When there has been a change in accounting principle,

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

The formula for horizontal analysis of changes since the base period is the current year amount

Horizontal analysis is appropriately performed

Extraordinary items are reported net of applicable taxes in a separate section of the income statement.

Ratios are used as tools in financial analysis

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

Another name for trend analysis is horizontal analysis.

Swiss Clothing Store had a balance in the Accounts Receivable account of $820,000 at the beginning of the year and a balance of $780,000 at the end of the year. Net credit sales during the year amounted to $7,200,000. The accounts receivable turnover ratio was

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

Each of the following is a factor affecting quality of earnings except

The following financial statement information is available for Buil Corporation: The current ratio for 2015 is

The acid-test (quick) ratio

Vertical analysis is also known as

Which one of the following is primarily interested in the liquidity of a company?

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 accounts receivable turnover for Ortiz?

The following amounts were taken from the financial statements of Leaf Company: The price-earnings ratio for 2015 is

Vertical analysis is a technique which expresses each item within a financial statement

Horizontal analysis evaluates financial statement data

Net income does not appear in the numerator of the

When there has been a change in accounting principle,

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

The formula for horizontal analysis of changes since the base period is the current year amount

Horizontal analysis is appropriately performed

Extraordinary items are reported net of applicable taxes in a separate section of the income statement.

Ratios are used as tools in financial analysis

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