Question 1

Comparisons can be made on each of the following bases except

Accepted Answer

A) industry averages. 
B) intercompany basis. 
C) intracompany basis. 
D) Each of these is a basis for comparison. 
A) industry averages. 
B) intercompany basis. 
C) intracompany basis. 
D) Each of these is a basis for comparison.

Question 2

If equal amounts are added to the numerator and the denominator of the current ratio, 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

Which one of the following is not a tool in financial statement analysis?

Accepted Answer

A) Horizontal analysis 
B) Circular analysis 
C) Vertical analysis 
D) Ratio analysis 
A) Horizontal analysis 
B) Circular analysis 
C) Vertical analysis 
D) Ratio analysis

Question 4

Nord Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $70,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Nord Company's current ratio?

Accepted Answer

A) The ratio remained unchanged. 
B) The change in the current ratio cannot be determined. 
C) The ratio decreased. 
D) The ratio increased. 
A) The ratio remained unchanged. 
B) The change in the current ratio cannot be determined. 
C) The ratio decreased. 
D) The ratio increased.

Question 5

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

Accepted Answer

A) Extraordinary items, Discontinued operations, Other revenues and expenses. 
B) Discontinued operations, Extraordinary items, Other revenues and expenses. 
C) Other revenues and expenses, Discontinued operations, Extraordinary items. 
D) Other revenues and expenses, Extraordinary items, Discontinued operations. 
A) Extraordinary items, Discontinued operations, Other revenues and expenses. 
B) Discontinued operations, Extraordinary items, Other revenues and expenses. 
C) Other revenues and expenses, Discontinued operations, Extraordinary items. 
D) Other revenues and expenses, Extraordinary items, Discontinued operations.

Question 6

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

Accepted Answer

A) True 
 B)False

Question 7

A percentage change can be computed only if the base amount is zero or positive.

Accepted Answer

A) True 
 B)False

Question 8

A measure of the percentage of each dollar of sales that results in net income is

Accepted Answer

A) profit margin. 
B) return on assets. 
C) return on common stockholders' equity. 
D) earnings per share. 
A) profit margin. 
B) return on assets. 
C) return on common stockholders' equity. 
D) earnings per share.

Question 9

If an item meets one (but not both) of the criteria for an extraordinary item, it

Accepted Answer

A) only needs to be disclosed in the footnotes of the financial statements. 
B) may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss). 
C) is reported as an "other revenue or gain" or "other expense and loss," net of tax. 
D) is reported at its gross amount as an "other revenue or gain" or "other expense or loss." 
A) only needs to be disclosed in the footnotes of the financial statements. 
B) may be treated as sales revenue (if it is a gain) and as an operating expense (if it is a loss). 
C) is reported as an "other revenue or gain" or "other expense and loss," net of tax. 
D) is reported at its gross amount as an "other revenue or gain" or "other expense or loss."

Question 10

Lake Company reported the following on its income statement:   An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

Accepted Answer

A) 11 times. 
B) 10 times. 
C) 8.5 times. 
D) 7.5 times. 
A) 11 times. 
B) 10 times. 
C) 8.5 times. 
D) 7.5 times.

Question 11

Assume the following sales data for a company:   If 2013 is the base year, what is the percentage increase in sales from 2013 to 2015?

Accepted Answer

A) 100% 
B) 61.5% 
C) 46.2% 
D) 68.4% 
A) 100% 
B) 61.5% 
C) 46.2% 
D) 68.4%

Question 12

In common size analysis,

Accepted Answer

A) a base amount is required. 
B) a base amount is optional. 
C) the same base is used across all financial statements analyzed. 
D) the results of the horizontal analysis are necessary inputs for performing the analysis. 
A) a base amount is required. 
B) a base amount is optional. 
C) the same base is used across all financial statements analyzed. 
D) the results of the horizontal analysis are necessary inputs for performing the analysis.

Question 13

If the average collection period is 60 days, what is the accounts receivable turnover?

Accepted Answer

A) 6.0 times 
B) 6.1 times 
C) 12.2 times 
D) None of these 
A) 6.0 times 
B) 6.1 times 
C) 12.2 times 
D) None of these

Question 14

Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 15

In performing a vertical analysis, the base for sales returns and allowances is

Accepted Answer

A) sales. 
B) sales discounts. 
C) net sales. 
D) total revenues. 
A) sales. 
B) sales discounts. 
C) net sales. 
D) total revenues.

Question 16

Which one of the following would not be considered a liquidity ratio?

Accepted Answer

A) Current ratio 
B) Inventory turnover 
C) Acid-test ratio 
D) Return on assets 
A) Current ratio 
B) Inventory turnover 
C) Acid-test ratio 
D) Return on assets

Question 17

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 18

Beacon, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $350,000 loss in the year of disposal. The loss on disposal of the segment was $150,000. If the tax rate is 30%, and income before income taxes was $2,300,000,

Accepted Answer

A) the income tax expense on the income before discontinued operations is $540,000. 
B) the income from continuing operations is $1,610,000. 
C) net income is $1,800,000. 
D) the losses from discontinued operations are reported net of income taxes at $150,000. 
A) the income tax expense on the income before discontinued operations is $540,000. 
B) the income from continuing operations is $1,610,000. 
C) net income is $1,800,000. 
D) the losses from discontinued operations are reported net of income taxes at $150,000.

Comparisons can be made on each of the following bases except

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

Which one of the following is not a tool in financial statement analysis?

Nord Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $70,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Nord Company's current ratio?

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

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

A percentage change can be computed only if the base amount is zero or positive.

A measure of the percentage of each dollar of sales that results in net income is

If an item meets one (but not both) of the criteria for an extraordinary item, it

Lake Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

Assume the following sales data for a company: If 2013 is the base year, what is the percentage increase in sales from 2013 to 2015?

In common size analysis,

If the average collection period is 60 days, what is the accounts receivable turnover?

Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

In performing a vertical analysis, the base for sales returns and allowances is

Which one of the following would not be considered a liquidity ratio?

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

Beacon, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $350,000 loss in the year of disposal. The loss on disposal of the segment was $150,000. If the tax rate is 30%, and income before income taxes was $2,300,000,

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

Comparisons can be made on each of the following bases except

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

Which one of the following is not a tool in financial statement analysis?

Nord Company had $375,000 of current assets and $150,000 of current liabilities before borrowing $70,000 from the bank with a 3-month note payable. What effect did the borrowing transaction have on Nord Company's current ratio?

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

Using borrowed money to increase the rate of return on common stockholders' equity is called "trading on the equity."

A percentage change can be computed only if the base amount is zero or positive.

A measure of the percentage of each dollar of sales that results in net income is

If an item meets one (but not both) of the criteria for an extraordinary item, it

Lake Company reported the following on its income statement: An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

Assume the following sales data for a company: If 2013 is the base year, what is the percentage increase in sales from 2013 to 2015?

In common size analysis,

If the average collection period is 60 days, what is the accounts receivable turnover?

Vertical analysis is a more sophisticated analytical tool than horizontal analysis.

In performing a vertical analysis, the base for sales returns and allowances is

Which one of the following would not be considered a liquidity ratio?

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

Beacon, Inc. disposes of an unprofitable segment of its business. The operation of the segment suffered a $350,000 loss in the year of disposal. The loss on disposal of the segment was $150,000. If the tax rate is 30%, and income before income taxes was $2,300,000,

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