Question 1

In a common size income statement, the 100% figure is

Accepted Answer

A) net income. 
B) cost of goods sold. 
C) gross profit. 
D) net sales. 
A) net income. 
B) cost of goods sold. 
C) gross profit. 
D) net sales.

Question 2

Bertram Corporation had net income of $325,000 and paid dividends to common stockholders of $39,000 in 2022.The weighted average number of shares outstanding in 2022 was 50,000 shares.Bertram Corporation's common stock is selling for $52 per share on the New York Stock Exchange.Bertram Corporation's payout ratio for 2022 is

Accepted Answer

A) $6.5 per share. 
B) 16%. 
C) 12%. 
D) 8.3%. 
A) $6.5 per share. 
B) 16%. 
C) 12%. 
D) 8.3%.

Question 3

A primary purpose of vertical analysis is to observe trends over a three-year period.

Accepted Answer

A) True 
 B)False

Question 4

Ratios are most useful in identifying

Accepted Answer

A) trends. 
B) differences. 
C) causes. 
D) relationships. 
A) trends. 
B) differences. 
C) causes. 
D) relationships.

Question 5

Alternative accounting methods affect the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 6

The discontinued operations section of the income statement refers to

Accepted Answer

A) discontinuance of a product line. 
B) the income or loss on products that have been completed and sold. 
C) obsolete equipment and discontinued inventory items. 
D) the disposal of a significant component of a business. 
A) discontinuance of a product line. 
B) the income or loss on products that have been completed and sold. 
C) obsolete equipment and discontinued inventory items. 
D) the disposal of a significant component of a business.

Question 7

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

Accepted Answer

A) True 
 B)False

Question 8

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 9

A common measure of liquidity is

Accepted Answer

A) return on assets. 
B) accounts receivable turnover. 
C) profit margin. 
D) debt to equity. 
A) return on assets. 
B) accounts receivable turnover. 
C) profit margin. 
D) debt to equity.

Question 10

In vertical analysis, the base amount for salaries and wages expense is generally

Accepted Answer

A) net sales. 
B) salary & wages expense in a previous year. 
C) gross profit. 
D) net income. 
A) net sales. 
B) salary & wages expense in a previous year. 
C) gross profit. 
D) net income.

Question 11

In performing a vertical analysis, the base for prepaid expenses is

Accepted Answer

A) total current assets. 
B) total assets. 
C) total liabilities. 
D) prepaid expenses in a previous year. 
A) total current assets. 
B) total assets. 
C) total liabilities. 
D) prepaid expenses in a previous year.

Question 12

Improper recognition of income is not one of the factors affecting the quality of earnings.

Accepted Answer

A) True 
 B)False

Question 13

The following information is available for Patterson Company:   The inventory turnover for 2022 is

Accepted Answer

A) 6.4 times. 
B) 6.0 times. 
C) 5.6 times. 
D) 3.0 times. 
A) 6.4 times. 
B) 6.0 times. 
C) 5.6 times. 
D) 3.0 times.

Question 14

The ratios that are used to determine a company's short-term debt paying ability are

Accepted Answer

A) asset turnover, times interest earned, current ratio, and accounts receivables turnover. 
B) times interest earned, inventory turnover, current ratio, and receivables turnover. 
C) times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover. 
D) current ratio, account receivable turnover, and inventory turnover. 
A) asset turnover, times interest earned, current ratio, and accounts receivables turnover. 
B) times interest earned, inventory turnover, current ratio, and receivables turnover. 
C) times interest earned, accounts receivable turnover ratio, current ratio, and inventory turnover. 
D) current ratio, account receivable turnover, and inventory turnover.

Question 15

Which of these is not a liquidity ratio?

Accepted Answer

A) Current ratio 
B) Asset turnover 
C) Inventory turnover 
D) Accounts receivable turnover 
A) Current ratio 
B) Asset turnover 
C) Inventory turnover 
D) Accounts receivable turnover

Question 16

When preparing an income statement, which of the following is the proper order for income statement components?

Accepted Answer

A) Comprehensive income, Other comprehensive income items, Net income 
B) Net income, Comprehensive income, Other comprehensive income items 
C) Net income, Other comprehensive income items, Comprehensive income 
D) Other comprehensive income items Net income, Comprehensive income 
A) Comprehensive income, Other comprehensive income items, Net income 
B) Net income, Comprehensive income, Other comprehensive income items 
C) Net income, Other comprehensive income items, Comprehensive income 
D) Other comprehensive income items Net income, Comprehensive income

Question 17

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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

Accepted Answer

A) 1.17 
B) 1.25 
C) 1.67 
D) 0.75 
A) 1.17 
B) 1.25 
C) 1.67 
D) 0.75

Question 20

Which of the following statements regarding changes in accounting principles is not true?

Accepted Answer

A) Most changes in accounting principles are only reported in current periods when the principle change takes place. 
B) Changes in accounting principles are allowed when new principles are preferable to old ones. 
C) Most changes in accounting principles are retroactively reported. 
D) Consistency is one of the biggest concerns when a change in accounting principle is undertaken. 
A) Most changes in accounting principles are only reported in current periods when the principle change takes place. 
B) Changes in accounting principles are allowed when new principles are preferable to old ones. 
C) Most changes in accounting principles are retroactively reported. 
D) Consistency is one of the biggest concerns when a change in accounting principle is undertaken.

In a common size income statement, the 100% figure is

A primary purpose of vertical analysis is to observe trends over a three-year period.

Ratios are most useful in identifying

Alternative accounting methods affect the quality of earnings.

The discontinued operations section of the income statement refers to

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

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

A common measure of liquidity is

In vertical analysis, the base amount for salaries and wages expense is generally

In performing a vertical analysis, the base for prepaid expenses is

Improper recognition of income is not one of the factors affecting the quality of earnings.

The following information is available for Patterson Company: The inventory turnover for 2022 is

The ratios that are used to determine a company's short-term debt paying ability are

Which of these is not a liquidity ratio?

When preparing an income statement, which of the following is the proper order for income statement components?

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

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

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

Which of the following statements regarding changes in accounting principles is not true?

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

Filters

Exam 13: Financial Analysis: The Big Picture

In a common size income statement, the 100% figure is

A primary purpose of vertical analysis is to observe trends over a three-year period.

Ratios are most useful in identifying

Alternative accounting methods affect the quality of earnings.

The discontinued operations section of the income statement refers to

Profitability ratios are frequently used as a basis for evaluating management's operating effectiveness.

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

A common measure of liquidity is

In vertical analysis, the base amount for salaries and wages expense is generally

In performing a vertical analysis, the base for prepaid expenses is

Improper recognition of income is not one of the factors affecting the quality of earnings.

The following information is available for Patterson Company: The inventory turnover for 2022 is

The ratios that are used to determine a company's short-term debt paying ability are

Which of these is not a liquidity ratio?

When preparing an income statement, which of the following is the proper order for income statement components?

Inventory turnover is a measure of liquidity that focuses on efficient use of inventory.

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

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

Which of the following statements regarding changes in accounting principles is not true?

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

Filters