Question 1

Comparing one company with another in the same industry should cause no problems since companies in the same industry are required to use the same GAAP.

Accepted Answer

A) True 
 B)False

Question 2

What are two difficulties that are encountered when two companies are compared?

Accepted Answer

Alternative accounting princip

Question 3

Earnings per share is an indication of how much

Accepted Answer

A) the company paid as dividends for each share of stock held by stockholders. 
B) the company earned for each share of outstanding common and preferred stock. 
C) the company earned for each share of outstanding common stock. 
D) cash the company has for each share of all outstanding stock. 
A) the company paid as dividends for each share of stock held by stockholders. 
B) the company earned for each share of outstanding common and preferred stock. 
C) the company earned for each share of outstanding common stock. 
D) cash the company has for each share of all outstanding stock.

Question 4

A banker is analyzing a company which operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?

Accepted Answer

A) The petroleum industry suffers from political pressures concerning the selling price of its products. 
B) Inflation has been high for several years in a row. 
C) All companies in the petroleum industry use the same accounting principles. 
D) The company has a large amount of interest payments related to many outstanding loans. 
A) The petroleum industry suffers from political pressures concerning the selling price of its products. 
B) Inflation has been high for several years in a row. 
C) All companies in the petroleum industry use the same accounting principles. 
D) The company has a large amount of interest payments related to many outstanding loans.

Question 5

In the numerator of the debt service coverage ratio, is a good substitute for cash flow from operations before interest and tax payments, especially where changes in these accounts are insignificant.

Accepted Answer

EBITDA or earnings b

Question 6

The base, or benchmark, on which all items on the income statement are compared is net sales.

Accepted Answer

A) True 
 B)False

Question 7

In considering equity and debt financing, which of the following statements is true?

Accepted Answer

A) Compared to equity financing, debt is a more expensive source of funding. 
B) Interest and dividends payments are required to be made by the issuing corporation. 
C) In general, the higher the proportion of total debt-to-equity ratio, the greater the likelihood the firm will have difficulty in meeting its obligations in some future period. 
D) Most firms prefer to have no debt and rely on equity financing. 
A) Compared to equity financing, debt is a more expensive source of funding. 
B) Interest and dividends payments are required to be made by the issuing corporation. 
C) In general, the higher the proportion of total debt-to-equity ratio, the greater the likelihood the firm will have difficulty in meeting its obligations in some future period. 
D) Most firms prefer to have no debt and rely on equity financing.

Question 8

The denominator of a return ratio will be some measure of the company's income for the period.

Accepted Answer

A) True 
 B)False

Question 9

Treetop Company paid off a $100,000 two-year note payable.The effect of this transaction is that the

Accepted Answer

A) earnings per share increased 
B) current ratio decreased 
C) debt-to-equity ratio increased 
D) debt-to-equity ratio decreased 
A) earnings per share increased 
B) current ratio decreased 
C) debt-to-equity ratio increased 
D) debt-to-equity ratio decreased

Question 10

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Accepted Answer

A) Debt-to-equity ratio 
B) Times interest earned ratio 
C) Debt service coverage ratio 
D) Earnings per share 
A) Debt-to-equity ratio 
B) Times interest earned ratio 
C) Debt service coverage ratio 
D) Earnings per share

Question 11

Presented below are selected data from the financial statements of Provost Corp.   The dividend payout ratio for 2016 is

Accepted Answer

A) 1.8% 
B) 30.0% 
C) 36.3% 
D) 38.0% 
A) 1.8% 
B) 30.0% 
C) 36.3% 
D) 38.0%

Question 12

Below are selected data from the financial statements of Moriarty Company.   The debt-to-equity ratio for 2016 is

Accepted Answer

A) increasing, which should be a major cause of concern for Moriarty Company. 
B) increasing, which should be a good sign in investors' eyes. 
C) decreasing, which should be a major cause of concern for Moriarty Company. 
D) decreasing, which should be a good sign in investors' eyes. 
A) increasing, which should be a major cause of concern for Moriarty Company. 
B) increasing, which should be a good sign in investors' eyes. 
C) decreasing, which should be a major cause of concern for Moriarty Company. 
D) decreasing, which should be a good sign in investors' eyes.

Question 13

Which profitability ratio requires the use of earnings per share in its calculation?

Accepted Answer

A) Price/earnings ratio 
B) Return on common stockholders' equity 
C) Dividend yield ratio 
D) Profit margin 
A) Price/earnings ratio 
B) Return on common stockholders' equity 
C) Dividend yield ratio 
D) Profit margin

Question 14

The definition of a conglomerate is a company that operates in one industry and uses different inventory valuation techniques.

Accepted Answer

A) True 
 B)False

Question 15

Ratios that focus on cash are more useful than those that focus on income in the evaluation of the liquidity of a company.

Accepted Answer

A) True 
 B)False

Question 16

The acid-test ratio differs from the current ratio in that it

Accepted Answer

A) represents the amount of cash on hand instead of the amount of working capital. 
B) excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible nonpayment. 
C) is a stricter test of a company's ability to pay its current debts as they are due. 
D) signals the need to liquidate marketable securities when it drops below 5 to 1. 
A) represents the amount of cash on hand instead of the amount of working capital. 
B) excludes inventories and accounts receivable from the numerator of the fraction because of obsolescence and possible nonpayment. 
C) is a stricter test of a company's ability to pay its current debts as they are due. 
D) signals the need to liquidate marketable securities when it drops below 5 to 1.

Question 17

The operating cycle of a manufacturer is the length of time between the

Accepted Answer

A) purchase of raw materials and the sale of the goods. 
B) sale of the goods and the collection of any outstanding receivables from the sale of the product. 
C) purchase of raw materials and collection of any outstanding receivables from the sale of the product. 
D) purchase of raw materials and the production of goods. 
A) purchase of raw materials and the sale of the goods. 
B) sale of the goods and the collection of any outstanding receivables from the sale of the product. 
C) purchase of raw materials and collection of any outstanding receivables from the sale of the product. 
D) purchase of raw materials and the production of goods.

Question 18

Shoreville Corp.'s December 31, 2014, balance sheet reported current assets of $260,000 and current liabilities of $200,000.The current ratio increased by 20% one year later, on December 31, 2015.Current liabilities on this date were $280,000.Determine current assets on December 31, 2015.

Accepted Answer

The current ratio on December 31, 2014,

Question 19

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay, while inventory need only be sold in a retail store.

Accepted Answer

A) True 
 B)False

Question 20

If a company must pay more for the amounts provided by creditors and preferred stockholders than it can earn overall, as indicated by the return on assets, there will be favorable leverage.

Accepted Answer

A) True 
 B)False

Comparing one company with another in the same industry should cause no problems since companies in the same industry are required to use the same GAAP.

What are two difficulties that are encountered when two companies are compared?

Earnings per share is an indication of how much

A banker is analyzing a company which operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?

In the numerator of the debt service coverage ratio, is a good substitute for cash flow from operations before interest and tax payments, especially where changes in these accounts are insignificant.

The base, or benchmark, on which all items on the income statement are compared is net sales.

In considering equity and debt financing, which of the following statements is true?

The denominator of a return ratio will be some measure of the company's income for the period.

Treetop Company paid off a $100,000 two-year note payable.The effect of this transaction is that the

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Presented below are selected data from the financial statements of Provost Corp. The dividend payout ratio for 2016 is

Below are selected data from the financial statements of Moriarty Company. The debt-to-equity ratio for 2016 is

Which profitability ratio requires the use of earnings per share in its calculation?

The definition of a conglomerate is a company that operates in one industry and uses different inventory valuation techniques.

Ratios that focus on cash are more useful than those that focus on income in the evaluation of the liquidity of a company.

The acid-test ratio differs from the current ratio in that it

The operating cycle of a manufacturer is the length of time between the

Shoreville Corp.'s December 31, 2014, balance sheet reported current assets of $260,000 and current liabilities of $200,000.The current ratio increased by 20% one year later, on December 31, 2015.Current liabilities on this date were $280,000.Determine current assets on December 31, 2015.

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay, while inventory need only be sold in a retail store.

If a company must pay more for the amounts provided by creditors and preferred stockholders than it can earn overall, as indicated by the return on assets, there will be favorable leverage.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International Financial Reporting Standards

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Exam 13: Financial Statement Analysis

Comparing one company with another in the same industry should cause no problems since companies in the same industry are required to use the same GAAP.

What are two difficulties that are encountered when two companies are compared?

Earnings per share is an indication of how much

A banker is analyzing a company which operates in the petroleum industry.Which of the following might be a major consideration in determining whether the company should receive a loan?

In the numerator of the debt service coverage ratio, is a good substitute for cash flow from operations before interest and tax payments, especially where changes in these accounts are insignificant.

The base, or benchmark, on which all items on the income statement are compared is net sales.

In considering equity and debt financing, which of the following statements is true?

The denominator of a return ratio will be some measure of the company's income for the period.

Treetop Company paid off a $100,000 two-year note payable.The effect of this transaction is that the

Which of the following solvency ratios is the best measure of a company's ability to pay interest and maturing principal amounts on its long-term debt?

Presented below are selected data from the financial statements of Provost Corp. The dividend payout ratio for 2016 is

Below are selected data from the financial statements of Moriarty Company. The debt-to-equity ratio for 2016 is

Which profitability ratio requires the use of earnings per share in its calculation?

The definition of a conglomerate is a company that operates in one industry and uses different inventory valuation techniques.

Ratios that focus on cash are more useful than those that focus on income in the evaluation of the liquidity of a company.

The acid-test ratio differs from the current ratio in that it

The operating cycle of a manufacturer is the length of time between the

Shoreville Corp.'s December 31, 2014, balance sheet reported current assets of $260,000 and current liabilities of $200,000.The current ratio increased by 20% one year later, on December 31, 2015.Current liabilities on this date were $280,000.Determine current assets on December 31, 2015.

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay, while inventory need only be sold in a retail store.

If a company must pay more for the amounts provided by creditors and preferred stockholders than it can earn overall, as indicated by the return on assets, there will be favorable leverage.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International Financial Reporting Standards

Filters