Question 1

A solvency ratio measures the income or operating success of an enterprise for a given period of time.

Accepted Answer

A) True 
 B)False

Question 2

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 3

A horizontal analysis performed on a statement of retained earnings would not show a percentage change in

Accepted Answer

A)  dividends paid. 
B)  net income. 
C)  expenses. 
D)  beginning retained earnings. 
A)  dividends paid. 
B)  net income. 
C)  expenses. 
D)  beginning retained earnings.

Question 4

Lake Company reported the following on its income statement: $$\begin{array} { l r } 
\text { Income before income taxes } & \$ 600,000 \
\text { Income tax expense } & 150,000 \
\text { Net income } & \$ 450,000
\end{array}$$ 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 5

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 6

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 7

Asset turnover measures

Accepted Answer

A)  how often a company replaces its assets. 
B)  how efficiently a company uses its assets to generate sales. 
C)  the portion of the assets that have been financed by creditors. 
D)  the overall rate of return on assets. 
A)  how often a company replaces its assets. 
B)  how efficiently a company uses its assets to generate sales. 
C)  the portion of the assets that have been financed by creditors. 
D)  the overall rate of return on assets.

Question 8

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 9

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. $\begin{array}{lr}\text { Assets }\
\text { Cash and short-term investments } & \$ 45,000 \
\text { Accounts receivable (net) } & 40,000 \
\text { Inventory } & 20,000 \
\text { Property, plant and equipment } & 210,000 \
\quad \text { Total Assets } & \$ 305,000\\
\text { Liabilities and Stockholders' Equity }\\text { Current liabilities } & \$ 50,000 \
\text { Long-term liabilities } & 95,000 \
\text { Stockholders' equity?common } & 160,000 \
\quad \text { Total Liabilities and Stockholders' Equity } & \$ 305,000 \\
\text { Income Statement }\\text { Sales } & \$ 110,000 \
\text { Cost of goods sold } & 66,000 \
\text { Gross profit } & 44,000 \
\text { Operating expenses } & 30,000 \
\quad \text { Net income } & \$ 14,000\\\text { Number of shares of common stock } & 6,000 \
\text { Market price of common stock } & \$ 20 \
\text { Dividends per share } & .50
\end{array}$ 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 10

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

Accepted Answer

A)  Other comprehensive income, Discontinued operations, Other revenues and expenses. 
B)  Discontinued operations, Other comprehensive income, Other revenues and expenses. 
C)  Other revenues and expenses, Discontinued operations, Other comprehensive income. 
D)  Other revenues and expenses, Other comprehensive income, Discontinued operations. 
A)  Other comprehensive income, Discontinued operations, Other revenues and expenses. 
B)  Discontinued operations, Other comprehensive income, Other revenues and expenses. 
C)  Other revenues and expenses, Discontinued operations, Other comprehensive income. 
D)  Other revenues and expenses, Other comprehensive income, Discontinued operations.

Question 11

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 12

The ratio that uses weighted average common shares outstanding in the denominator is the

Accepted Answer

A)  price-earnings ratio. 
B)  return on common stockholders' equity. 
C)  earnings per share. 
D)  payout ratio. 
A)  price-earnings ratio. 
B)  return on common stockholders' equity. 
C)  earnings per share. 
D)  payout ratio.

Question 13

A stockholder is interested in the ability of a firm to

Accepted Answer

A)  pay consistent dividends. 
B)  appreciate in share price. 
C)  survive over a long period. 
D)  All of these answer choices are correct. 
A)  pay consistent dividends. 
B)  appreciate in share price. 
C)  survive over a long period. 
D)  All of these answer choices are correct.

Question 14

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 the amount of Nord Company's working capital?

Accepted Answer

A)  No effect 
B)  $70,000 increase 
C)  $140,000 increase 
D)  $70,000 decrease 
A)  No effect 
B)  $70,000 increase 
C)  $140,000 increase 
D)  $70,000 decrease

Question 15

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 16

Analysis of financial statements is enhanced with the use of comparative data.

Accepted Answer

A) True 
 B)False

Question 17

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Vertical analysis is also called

Accepted Answer

A)  common size analysis. 
B)  horizontal analysis. 
C)  ratio analysis. 
D)  trend analysis. 
A)  common size analysis. 
B)  horizontal analysis. 
C)  ratio analysis. 
D)  trend analysis.

Question 20

A liquidity ratio measures the

Accepted Answer

A)  income or operating success of an enterprise over a period of time. 
B)  ability of the enterprise to survive over a long period of time. 
C)  short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. 
D)  number of times interest is earned. 
A)  income or operating success of an enterprise over a period of time. 
B)  ability of the enterprise to survive over a long period of time. 
C)  short-term ability of the enterprise to pay its maturing obligations and to meet unexpected needs for cash. 
D)  number of times interest is earned.

A solvency ratio measures the income or operating success of an enterprise for a given period of time.

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

A horizontal analysis performed on a statement of retained earnings would not show a percentage change in

Lake Company reported the following on its income statement: Income before income taxes \ 600,000 Income tax expense 150,000 Net income \ 450,000 An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

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

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

Asset turnover measures

Horizontal analysis evaluates financial statement data

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

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

The ratio that uses weighted average common shares outstanding in the denominator is the

A stockholder is interested in the ability of a firm to

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 the amount of Nord Company's working capital?

Vertical analysis is also known as

Analysis of financial statements is enhanced with the use of comparative data.

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

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

Vertical analysis is also called

A liquidity ratio measures the

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Filters

Exam 14: Financial Statement Analysis

A solvency ratio measures the income or operating success of an enterprise for a given period of time.

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

A horizontal analysis performed on a statement of retained earnings would not show a percentage change in

Lake Company reported the following on its income statement: Income before income taxes \ 600,000 Income tax expense 150,000 Net income \ 450,000 An analysis of the income statement revealed that interest expense was $60,000. Lake Company's times interest earned was

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

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

Asset turnover measures

Horizontal analysis evaluates financial statement data

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

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

The ratio that uses weighted average common shares outstanding in the denominator is the

A stockholder is interested in the ability of a firm to

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 the amount of Nord Company's working capital?

Vertical analysis is also known as

Analysis of financial statements is enhanced with the use of comparative data.

Horizontal analysis is a technique for evaluating a financial statement item in the current year with other items in the current year.

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

Vertical analysis is also called

A liquidity ratio measures the

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Pricing

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Statement of Cash Flows

Filters