Question 1

The disposal of a significant segment of a business is called

Accepted Answer

A)  a change in accounting principle. 
B)  an extraordinary item. 
C)  an other expense. 
D)  discontinued operations. 
A)  a change in accounting principle. 
B)  an extraordinary item. 
C)  an other expense. 
D)  discontinued operations.

Question 2

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

Accepted Answer

A)  50.0% 
B)  16.7% 
C)  44.4% 
D)  22.2% 
A)  50.0% 
B)  16.7% 
C)  44.4% 
D)  22.2%

Question 3

Prepare a partial income statement, beginning with income before income taxes using the following information for Simpson Corporation for the fiscal year ended December 31, 2010:   
Simpson Corporation is subject to a 30% income tax rate.

Accepted Answer

The answer of Prepare a partial income statement, beginning with...

Question 4

Each of the following is included in computing the acid-test ratio except

Accepted Answer

A)  cash. 
B)  inventory. 
C)  receivables. 
D)  short-term investments. 
A)  cash. 
B)  inventory. 
C)  receivables. 
D)  short-term investments.

Question 5

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 6

If a company has sales of $110 in 2010 and $154 in 2011, the percentage increase in sales from 2010 to 2011 is 140%.

Accepted Answer

A) True 
 B)False

Question 7

From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.

Accepted Answer

A) True 
 B)False

Question 8

In performing a vertical analysis, the base for sales revenues on the income statement is

Accepted Answer

A)  net sales. 
B)  sales. 
C)  net income. 
D)  cost of goods available for sale. 
A)  net sales. 
B)  sales. 
C)  net income. 
D)  cost of goods available for sale.

Question 9

The following information was taken from the financial statements of Lee Company:   
Instructions
(a) Compute the net sales for each year.
(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year.
(c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).

Accepted Answer

The answer of The following information was taken from the...

Question 10

The current ratio is

Accepted Answer

A)  calculated by dividing current liabilities by current assets. 
B)  used to evaluate a company's liquidity and short-term debt paying ability. 
C)  used to evaluate a company's solvency and long-term debt paying ability. 
D)  calculated by subtracting current liabilities from current assets. 
A)  calculated by dividing current liabilities by current assets. 
B)  used to evaluate a company's liquidity and short-term debt paying ability. 
C)  used to evaluate a company's solvency and long-term debt paying ability. 
D)  calculated by subtracting current liabilities from current assets.

Question 11

In 2010 Jackson Corporation reported income from operations $180,000, interest expense $50,000, and income tax expense $40,000. Jackson's times interest earned ratio was:

Accepted Answer

A)  5.4 times. 
B)  4.6 times. 
C)  4.4 times. 
D)  3.6 times. 
A)  5.4 times. 
B)  4.6 times. 
C)  4.4 times. 
D)  3.6 times.

Question 12

Which one of the following is not a characteristic generally evaluated in analyzing financial statements?

Accepted Answer

A)  Liquidity 
B)  Profitability 
C)  Marketability 
D)  Solvency 
A)  Liquidity 
B)  Profitability 
C)  Marketability 
D)  Solvency

Question 13

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 14

Selected data for Nancy's Store appear below.   
Instructions
Compute the following for 2011:
(a) Gross profit rate.
(b) Inventory turnover.
(c) Receivables turnover.

Accepted Answer

(a) Gross profit = Net Sales - Cost of g

Question 15

Vertical and horizontal analyses are concerned with the format used to prepare financial statements.

Accepted Answer

A) True 
 B)False

Question 16

The following ratios have been computed for Morgan Company for 2011.   
Morgan Company's 2011 financial statements with missing information follow:   
   
Instructions
Use the above ratios and information from the Morgan Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

Accepted Answer

@#IMG-DLM& (1) Net i

Question 17

Parr Hardware Store had net credit sales of $6,500,000 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 $700,000, respectively. The receivables turnover was

Accepted Answer

A)  7.7 times. 
B)  10.8 times. 
C)  9.3 times. 
D)  10 times. 
A)  7.7 times. 
B)  10.8 times. 
C)  9.3 times. 
D)  10 times.

Question 18

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 19

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 un 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 un reporting the results of operations of the current year, but there is no change to prior years.

Question 20

Miley Corporation had net income of $250,000 and paid dividends to common stockholders of $50,000 in 2010. The weighted average number of shares outstanding in 2010 was 50,000 shares. Miley Corporation's common stock is selling for $30 per share on the New York Stock Exchange.
Miley Corporation's payout ratio for 2010 is

Accepted Answer

A)  25%. 
B)  20%. 
C)  12.5%. 
D)  $5 per share. 
A)  25%. 
B)  20%. 
C)  12.5%. 
D)  $5 per share.

Exam 18: Financial Analysis: the Big Picture

The disposal of a significant segment of a business is called

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

Prepare a partial income statement, beginning with income before income taxes using the following information for Simpson Corporation for the fiscal year ended December 31, 2010: Simpson Corporation is subject to a 30% income tax rate.

Each of the following is included in computing the acid-test ratio except

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

If a company has sales of $110 in 2010 and $154 in 2011, the percentage increase in sales from 2010 to 2011 is 140%.

From a creditor's point of view, the higher the total debt to total assets ratio, the lower the risk that the company may be unable to pay its obligations.

In performing a vertical analysis, the base for sales revenues on the income statement is

The current ratio is

In 2010 Jackson Corporation reported income from operations $180,000, interest expense $50,000, and income tax expense $40,000. Jackson's times interest earned ratio was:

Which one of the following is not a characteristic generally evaluated in analyzing financial statements?

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

Selected data for Nancy's Store appear below. Instructions Compute the following for 2011: (a) Gross profit rate. (b) Inventory turnover. (c) Receivables turnover.

Vertical and horizontal analyses are concerned with the format used to prepare financial statements.

Parr Hardware Store had net credit sales of $6,500,000 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 $700,000, respectively. The receivables turnover was

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

When there has been a change in accounting principle,

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters