Question 1

A long-term lender would look at the company's solvency to determine a company's ability to survive a long period of time.

Accepted Answer

A) True 
 B)False  True

Question 2

Free cash flow is the amount of excess cash a company generates after paying to maintain its current physical plant.

Accepted Answer

A) True 
 B)False  False

Question 3

Profitability ratios measure a company's operating success for a specific period of time.

Accepted Answer

A) True 
 B)False  True

Question 4

In general, the faster the receivable turnover, the better and more reliable the _______________ is.

Accepted Answer

A)  collection period 
B)  current ratio 
C)  inventory ratio 
D)  days sales in inventory 
A)  collection period 
B)  current ratio 
C)  inventory ratio 
D)  days sales in inventory

Question 5

A higher receivable turnover than last year means that the company is collecting their receivable slower this year than last year.

Accepted Answer

A) True 
 B)False

Question 6

Horizontal analysis is appropriately performed

Accepted Answer

A)  only on the income statement. 
B)  only on the balance sheet. 
C)  only on the statement of retained earnings. 
D)  on all three of these statements. 
A)  only on the income statement. 
B)  only on the balance sheet. 
C)  only on the statement of retained earnings. 
D)  on all three of these statements.

Question 7

A company can increase its free cash flow by all of the following EXCEPT

Accepted Answer

A)  receiving increased dividend income. 
B)  increasing spending on property, plant, and equipment. 
C)  speeding up the collection of accounts receivable. 
D)  decreasing payments to suppliers. 
A)  receiving increased dividend income. 
B)  increasing spending on property, plant, and equipment. 
C)  speeding up the collection of accounts receivable. 
D)  decreasing payments to suppliers.

Question 8

Inventory turnover measures the average number of times that the inventory is sold during the year. Its purpose is to measure the ____________ of the inventory.

Accepted Answer

A)  liquidity 
B)  validity 
C)  solvency 
D)  profitability 
A)  liquidity 
B)  validity 
C)  solvency 
D)  profitability

Question 9

A shareholder 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. 
A)  pay consistent dividends. 
B)  appreciate in share price. 
C)  survive over a long period. 
D)  all of these.

Question 10

Net sales are $1,500,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

Accepted Answer

A)  $500,000 
B)  $300,000 
C)  $700,000 
D)  $400,000 
A)  $500,000 
B)  $300,000 
C)  $700,000 
D)  $400,000

Question 11

In a horizontal analysis, if there is a negative amount in the base year and a positive amount in the next year, then no percentage change can be calculated.

Accepted Answer

A) True 
 B)False

Question 12

Lancaster Landscaping Limited reported the following on its income statement: $\begin{array}{lr}
\text { Profit before income taxes } & \$ 560,000 \
\text { Income tax expense } & 140,000 \
\text { Profit } & \$ 420,000
\end{array}$ An analysis of the income statement revealed that interest expense was $40,000. Lancaster's interest coverage ratio was

Accepted Answer

A)  15 times. 
B)  14 times. 
C)  10.5 times. 
D)  11.5 times. 
A)  15 times. 
B)  14 times. 
C)  10.5 times. 
D)  11.5 times.

Question 13

Horizontal analysis will measure the percentage change over two or more periods.

Accepted Answer

A) True 
 B)False

Question 14

The receivables turnover is used to assess the liquidity of the accounts receivable.

Accepted Answer

A) True 
 B)False

Question 15

Most companies with stable earnings have a low payout ratio.

Accepted Answer

A) True 
 B)False

Question 16

An increase in a company's gross profit margin indicates that the company

Accepted Answer

A)  has increased sales volume. 
B)  has increased selling prices. 
C)  has decreased its cost of goods sold. 
D)  potentially any of the above could have occurred. 
A)  has increased sales volume. 
B)  has increased selling prices. 
C)  has decreased its cost of goods sold. 
D)  potentially any of the above could have occurred.

Question 17

Earnings per share is a measure of the profit earned on each preferred share.

Accepted Answer

A) True 
 B)False

Question 18

In a vertical analysis of the balance sheet, all items are expressed as a percentage of total assets.

Accepted Answer

A) True 
 B)False

Question 19

If the base-year revenue is $8,606 and the increase between the past year and the current year is $515, then the revenue increased by 6%.

Accepted Answer

A) True 
 B)False

Question 20

A company has an average inventory on hand of $60,000 and the average days to sell inventory is 29.2 days. What is the cost of goods sold?

Accepted Answer

A)  $750,000 
B)  $1,752,000 
C)  $739,726 
D)  $876,000 
A)  $750,000 
B)  $1,752,000 
C)  $739,726 
D)  $876,000

A long-term lender would look at the company's solvency to determine a company's ability to survive a long period of time.

Free cash flow is the amount of excess cash a company generates after paying to maintain its current physical plant.

Profitability ratios measure a company's operating success for a specific period of time.

In general, the faster the receivable turnover, the better and more reliable the _______________ is.

A higher receivable turnover than last year means that the company is collecting their receivable slower this year than last year.

Horizontal analysis is appropriately performed

A company can increase its free cash flow by all of the following EXCEPT

Inventory turnover measures the average number of times that the inventory is sold during the year. Its purpose is to measure the ____________ of the inventory.

A shareholder is interested in the ability of a firm to

Net sales are $1,500,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

In a horizontal analysis, if there is a negative amount in the base year and a positive amount in the next year, then no percentage change can be calculated.

Lancaster Landscaping Limited reported the following on its income statement: Profit before income taxes \ 560,000 Income tax expense 140,000 Profit \ 420,000 An analysis of the income statement revealed that interest expense was $40,000. Lancaster's interest coverage ratio was

Horizontal analysis will measure the percentage change over two or more periods.

The receivables turnover is used to assess the liquidity of the accounts receivable.

Most companies with stable earnings have a low payout ratio.

An increase in a company's gross profit margin indicates that the company

Earnings per share is a measure of the profit earned on each preferred share.

In a vertical analysis of the balance sheet, all items are expressed as a percentage of total assets.

If the base-year revenue is $8,606 and the increase between the past year and the current year is $515, then the revenue increased by 6%.

A company has an average inventory on hand of $60,000 and the average days to sell inventory is 29.2 days. What is the cost of goods sold?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Investments

Filters

Exam 17: Financial Statement Analysis

A long-term lender would look at the company's solvency to determine a company's ability to survive a long period of time.

Free cash flow is the amount of excess cash a company generates after paying to maintain its current physical plant.

Profitability ratios measure a company's operating success for a specific period of time.

In general, the faster the receivable turnover, the better and more reliable the _______________ is.

A higher receivable turnover than last year means that the company is collecting their receivable slower this year than last year.

Horizontal analysis is appropriately performed

A company can increase its free cash flow by all of the following EXCEPT

Inventory turnover measures the average number of times that the inventory is sold during the year. Its purpose is to measure the ____________ of the inventory.

A shareholder is interested in the ability of a firm to

Net sales are $1,500,000, beginning total assets are $700,000, and the asset turnover is 3.0. What is the ending total asset balance?

In a horizontal analysis, if there is a negative amount in the base year and a positive amount in the next year, then no percentage change can be calculated.

Lancaster Landscaping Limited reported the following on its income statement: Profit before income taxes \ 560,000 Income tax expense 140,000 Profit \ 420,000 An analysis of the income statement revealed that interest expense was $40,000. Lancaster's interest coverage ratio was

Horizontal analysis will measure the percentage change over two or more periods.

The receivables turnover is used to assess the liquidity of the accounts receivable.

Most companies with stable earnings have a low payout ratio.

An increase in a company's gross profit margin indicates that the company

Earnings per share is a measure of the profit earned on each preferred share.

In a vertical analysis of the balance sheet, all items are expressed as a percentage of total assets.

If the base-year revenue is $8,606 and the increase between the past year and the current year is $515, then the revenue increased by 6%.

A company has an average inventory on hand of $60,000 and the average days to sell inventory is 29.2 days. What is the cost of goods sold?

Accounting in Action

The Recording Process

Adjusting the Accounts

Completion of the Accounting Cycle

Accounting for Merchandising Operations

Inventory Costing

Internal Control and Cash

Long-Lived Assets

Current Liabilities

Accounting Principles

Accounting for Partnerships

Introduction to Corporations

Corporations: Additional Topics and Ifrs

Non-Current Liabilities

The Cash Flow Statement

Investments

Filters