Question 1

Which one of the following is not a characteristic generally evaluated in ratio analysis?

Accepted Answer

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

Question 2

If Year 1 sales equal $780, Year 2 sales equal $819, and Year 3 sales equal $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

Accepted Answer

A) 95%. 
B) 115%. 
C) 105%. 
D) 109%. 
A) 95%. 
B) 115%. 
C) 105%. 
D) 109%. C

Question 3

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Accepted Answer

A) True 
 B)False  False

Question 4

Comparative balance sheets

Accepted Answer

A) are usually prepared for at least one year. 
B) are usually prepared for at least two years. 
C) do not show both dollar amount and percentage changes. 
D) do not show a comparison of total stockholders' equity. 
A) are usually prepared for at least one year. 
B) are usually prepared for at least two years. 
C) do not show both dollar amount and percentage changes. 
D) do not show a comparison of total stockholders' equity.

Question 5

Given the following data for the King Company:   How would common stock appear on a common size balance sheet?

Accepted Answer

A) 20% 
B) 70% 
C) 28% 
D) 30% 
A) 20% 
B) 70% 
C) 28% 
D) 30%

Question 6

Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year.The average inventory for the year amounted to $1,250,000.The inventory turnover for the year is

Accepted Answer

A) 7.2 times. 
B) 5.6 times. 
C) 5.2 times. 
D) 4.2 times. 
A) 7.2 times. 
B) 5.6 times. 
C) 5.2 times. 
D) 4.2 times.

Question 7

A company has an average inventory on hand of $90,000 and its average days in inventory is 36.5 days.What is the cost of goods sold?

Accepted Answer

A) $900,000 
B) $2,102,400 
C) $2,106,000 
D) $1,051,200 
A) $900,000 
B) $2,102,400 
C) $2,106,000 
D) $1,051,200

Question 8

Which of the following income statement figures would probably be the best indicator of a company's future performance?

Accepted Answer

A) Total revenues 
B) Income from operations 
C) Net income 
D) Gross profit 
A) Total revenues 
B) Income from operations 
C) Net income 
D) Gross profit

Question 9

In the vertical analysis of an income statement, each item is generally stated as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 10

A high accounts receivable turnover indicates

Accepted Answer

A) customers are making payments quickly. 
B) a large portion of the company's sales are on credit. 
C) many customers are not paying their receivables. 
D) the company's sales have increased. 
A) customers are making payments quickly. 
B) a large portion of the company's sales are on credit. 
C) many customers are not paying their receivables. 
D) the company's sales have increased.

Question 11

A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons?

Accepted Answer

A) Industry average comparison 
B) Intracompany comparison 
C) Intercompany comparison 
D) Comprehensive income comparison 
A) Industry average comparison 
B) Intracompany comparison 
C) Intercompany comparison 
D) Comprehensive income comparison

Question 12

Lupton Inc.disposes of an unprofitable segment of its business.The operation of the segment suffered a $200,000 loss in the year of disposal.The loss on disposal of the segment was $100,000.If the tax rate is 30%, and income before income taxes was $1,600,000,

Accepted Answer

A) the income tax expense on the income before discontinued operations is $390,000. 
B) the income from continuing operations is $1,120,000. 
C) net income is $1,300,000. 
D) the losses from discontinued operations are reported net of income taxes at $300,000. 
A) the income tax expense on the income before discontinued operations is $390,000. 
B) the income from continuing operations is $1,120,000. 
C) net income is $1,300,000. 
D) the losses from discontinued operations are reported net of income taxes at $300,000.

Question 13

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

Accepted Answer

A) should not exceed 30 days. 
B) can be any length as long as the customer continues to buy merchandise. 
C) should not greatly exceed the return period. 
D) should not greatly exceed the credit term period. 
A) should not exceed 30 days. 
B) can be any length as long as the customer continues to buy merchandise. 
C) should not greatly exceed the return period. 
D) should not greatly exceed the credit term period.

Question 14

The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit.   What is the inventory turnover for this company?

Accepted Answer

A) 2 times 
B) 2.25 times 
C) 1 time 
D) .44 times 
A) 2 times 
B) 2.25 times 
C) 1 time 
D) .44 times

Question 15

If equal amounts are added to the numerator and the denominator of the current ratio and the ratio is over one, 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 16

Which of the following would not be considered an example of a discontinued operation?

Accepted Answer

A) Shifting production processes within an operation 
B) Elimination of a major class of customers 
C) Elimination of an entire activity 
D) Disposal of a significant component of a business 
A) Shifting production processes within an operation 
B) Elimination of a major class of customers 
C) Elimination of an entire activity 
D) Disposal of a significant component of a business

Question 17

When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.

Accepted Answer

A) True 
 B)False

Question 18

The asset turnover is

Accepted Answer

A) net sales divided by net income. 
B) average total assets divided by net income. 
C) net sales divided by average total assets. 
D) average total assets divided by net sales. 
A) net sales divided by net income. 
B) average total assets divided by net income. 
C) net sales divided by average total assets. 
D) average total assets divided by net sales.

Question 19

The current assets of Orangette Company are $292,500.The current liabilities are $130,000.The current ratio expressed as a proportion is

Accepted Answer

A) 225%. 
B) 2.25:1. 
C) .44:1. 
D) $130,000 ÷ $292,500. 
A) 225%. 
B) 2.25:1. 
C) .44:1. 
D) $130,000 ÷ $292,500.

Question 20

The accounts receivable turnover and inventory turnover are used to analyze

Accepted Answer

A) long-term solvency. 
B) profitability. 
C) liquidity. 
D) leverage. 
A) long-term solvency. 
B) profitability. 
C) liquidity. 
D) leverage.

Which one of the following is not a characteristic generally evaluated in ratio analysis?

If Year 1 sales equal $780, Year 2 sales equal $819, and Year 3 sales equal $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Comparative balance sheets

Given the following data for the King Company: How would common stock appear on a common size balance sheet?

Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year.The average inventory for the year amounted to $1,250,000.The inventory turnover for the year is

A company has an average inventory on hand of $90,000 and its average days in inventory is 36.5 days.What is the cost of goods sold?

Which of the following income statement figures would probably be the best indicator of a company's future performance?

In the vertical analysis of an income statement, each item is generally stated as a percentage of net income.

A high accounts receivable turnover indicates

A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons?

Lupton Inc.disposes of an unprofitable segment of its business.The operation of the segment suffered a $200,000 loss in the year of disposal.The loss on disposal of the segment was $100,000.If the tax rate is 30%, and income before income taxes was $1,600,000,

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

The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the inventory turnover for this company?

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

Which of the following would not be considered an example of a discontinued operation?

When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.

The asset turnover is

The current assets of Orangette Company are $292,500.The current liabilities are $130,000.The current ratio expressed as a proportion is

The accounts receivable turnover and inventory turnover are used to analyze

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Understanding Investments in Debt and Equity Securities

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Exam 13: Financial Analysis: The Big Picture

Which one of the following is not a characteristic generally evaluated in ratio analysis?

If Year 1 sales equal $780, Year 2 sales equal $819, and Year 3 sales equal $896, the percentage to be assigned for Year 2 in a trend analysis, assuming that Year 1 is the base year, is

The loss on disposal of a significant component of a business is disclosed in the statement of retained earnings.

Comparative balance sheets

Given the following data for the King Company: How would common stock appear on a common size balance sheet?

Savory Thymes, Inc.had net credit sales of $9,000,000 and cost of goods sold of $5,250,000 for the year.The average inventory for the year amounted to $1,250,000.The inventory turnover for the year is

A company has an average inventory on hand of $90,000 and its average days in inventory is 36.5 days.What is the cost of goods sold?

Which of the following income statement figures would probably be the best indicator of a company's future performance?

In the vertical analysis of an income statement, each item is generally stated as a percentage of net income.

A high accounts receivable turnover indicates

A comparison with other companies that provides insight into a company's competitive position is most commonly known as which of the following types of comparisons?

Lupton Inc.disposes of an unprofitable segment of its business.The operation of the segment suffered a $200,000 loss in the year of disposal.The loss on disposal of the segment was $100,000.If the tax rate is 30%, and income before income taxes was $1,600,000,

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

The following information pertains to Unique Company.Assume that all balance sheet amounts represent both average and ending balance figures.Assume that all sales were on credit. What is the inventory turnover for this company?

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

Which of the following would not be considered an example of a discontinued operation?

When the disposal of a significant segment occurs, the income statement should report both income from continuing operations and income (loss) from discontinued operations.

The asset turnover is

The current assets of Orangette Company are $292,500.The current liabilities are $130,000.The current ratio expressed as a proportion is

The accounts receivable turnover and inventory turnover are used to analyze

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Understanding Investments in Debt and Equity Securities

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