Question 1

Showdown Co. had net sales of $680,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 10.6.

Accepted Answer

A) True 
 B)False

Question 2

The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Accepted Answer

A) True 
 B)False

Question 3

Protection Co. had net sales of $10,500 million. Its average account receivables were$1,750 million. Its accounts receivable turnover was 6.

Accepted Answer

A) True 
 B)False

Question 4

The ability to provide financial rewards sufficient to attract and retain financing is called:

Accepted Answer

A)  Market. 
B)  Liquidity and efficiency. 
C)  Profitability. 
D)  Creditworthiness. 
E)  Liquidity and solvency. 
A)  Market. 
B)  Liquidity and efficiency. 
C)  Profitability. 
D)  Creditworthiness. 
E)  Liquidity and solvency.

Question 5

Horizontal statement analysis is used to reveal changes in the relative importance of each financial statement item.

Accepted Answer

A) True 
 B)False

Question 6

Intercompany analysis is based on internal comparisons.

Accepted Answer

A) True 
 B)False

Question 7

Dividend yield measures:

Accepted Answer

A)  The annual cash dividends per share paid to common shareholders relative to the amount of retained earnings. 
B)  The annual cash dividends per share paid to common shareholders relative to the amount of cash. 
C)  The annual cash dividends per share paid to common shareholders relative to the stock's market price. 
D)  The annual cash dividends per share paid to common shareholders relative to the investors' purchase price of the stock. 
E)  The annual cash dividends per share paid to common shareholders relative to the earnings per share. 
A)  The annual cash dividends per share paid to common shareholders relative to the amount of retained earnings. 
B)  The annual cash dividends per share paid to common shareholders relative to the amount of cash. 
C)  The annual cash dividends per share paid to common shareholders relative to the stock's market price. 
D)  The annual cash dividends per share paid to common shareholders relative to the investors' purchase price of the stock. 
E)  The annual cash dividends per share paid to common shareholders relative to the earnings per share.

Question 8

A company's board of directors analyzes financial statements to assess future company prospects for investing and lending decisions.

Accepted Answer

A) True 
 B)False

Question 9

Total asset turnover is calculated by dividing:

Accepted Answer

A)  Gross sales by average total assets. 
B)  Average total assets by gross sales. 
C)  Average total assets by net sales. 
D)  Net sales by average total assets. 
E)  Net accounts receivables by total assets. 
A)  Gross sales by average total assets. 
B)  Average total assets by gross sales. 
C)  Average total assets by net sales. 
D)  Net sales by average total assets. 
E)  Net accounts receivables by total assets.

Question 10

The quick assets are:

Accepted Answer

A)  Cash, accounts receivable, prepaid expenses. 
B)  Accounts receivable, inventory, prepaid expenses. 
C)  Cash, short-term investments, accounts receivable. 
D)  Cash, short-term investments, prepaid expenses. 
E)  Cash, inventory, accounts receivable. 
A)  Cash, accounts receivable, prepaid expenses. 
B)  Accounts receivable, inventory, prepaid expenses. 
C)  Cash, short-term investments, accounts receivable. 
D)  Cash, short-term investments, prepaid expenses. 
E)  Cash, inventory, accounts receivable.

Question 11

The merchandise turnover ratio is used to measure profitability.

Accepted Answer

A) True 
 B)False

Question 12

The current ratio:

Accepted Answer

A)  Helps to assess a company's ability to pay its debts in the near future. 
B)  Reveals problems in a business if it is less than 1. 
C)  Is current assets divided by current liabilities and helps to assess a company's ability to pay its debts in the near future. 
D)  Is current assets divided by current liabilities. 
E)  All of these answers are correct. 
A)  Helps to assess a company's ability to pay its debts in the near future. 
B)  Reveals problems in a business if it is less than 1. 
C)  Is current assets divided by current liabilities and helps to assess a company's ability to pay its debts in the near future. 
D)  Is current assets divided by current liabilities. 
E)  All of these answers are correct.

Question 13

The pledged assets to secured liabilities ratio:

Accepted Answer

A)  Can be calculated from the book value of assets and liabilities. 
B)  Can always be calculated from information provided in the financial statements. 
C)  Is not relevant to secured creditors. 
D)  Is a method of determining if the pledged assets of a debtor will provide adequate security for a creditor. 
E)  Is calculated by dividing book value of secured liabilities by book value of pledged assets. 
A)  Can be calculated from the book value of assets and liabilities. 
B)  Can always be calculated from information provided in the financial statements. 
C)  Is not relevant to secured creditors. 
D)  Is a method of determining if the pledged assets of a debtor will provide adequate security for a creditor. 
E)  Is calculated by dividing book value of secured liabilities by book value of pledged assets.

Question 14

Days' sales in inventory is calculated by:

Accepted Answer

A)  Ending inventory divided by cost of goods sold times 365. 
B)  Dividing merchandise inventory by cost of goods sold. 
C)  Cost of goods sold divided by ending inventory times 365. 
D)  Ending inventory divided by cost of goods sold. 
E)  Dividing cost of goods sold by merchandise inventory. 
A)  Ending inventory divided by cost of goods sold times 365. 
B)  Dividing merchandise inventory by cost of goods sold. 
C)  Cost of goods sold divided by ending inventory times 365. 
D)  Ending inventory divided by cost of goods sold. 
E)  Dividing cost of goods sold by merchandise inventory.

Question 15

Ratios that measure solvency include:

Accepted Answer

A)  Current ratio. 
B)  Total asset turnover. 
C)  Times interest earned. 
D)  Pledged assets to secured liabilities. 
E)  Both pledged assets to secured liabilities and times interest earned. 
A)  Current ratio. 
B)  Total asset turnover. 
C)  Times interest earned. 
D)  Pledged assets to secured liabilities. 
E)  Both pledged assets to secured liabilities and times interest earned.

Question 16

The current ratio:

Accepted Answer

A)  Is used to evaluate a company's ability to pay its short-term obligations. 
B)  Measures the effect of operating income on profit. 
C)  Is used to measure a company's profitability and to evaluate a company's ability to pay its short-term obligations. 
D)  Is used to measure the relationship between assets and long-term debt. 
E)  Is used to measure a company's profitability. 
A)  Is used to evaluate a company's ability to pay its short-term obligations. 
B)  Measures the effect of operating income on profit. 
C)  Is used to measure a company's profitability and to evaluate a company's ability to pay its short-term obligations. 
D)  Is used to measure the relationship between assets and long-term debt. 
E)  Is used to measure a company's profitability.

Question 17

CrossSports had interest expense of $12,000 and its income before interest and income taxes was $28,000. Its times interest earned ratio:

Accepted Answer

A)  Is both 2.3 and acceptable. 
B)  Is acceptable. 
C)  Is 2.3. 
D)  Is both 0.3 and acceptable. 
E)  Is 0.3. 
A)  Is both 2.3 and acceptable. 
B)  Is acceptable. 
C)  Is 2.3. 
D)  Is both 0.3 and acceptable. 
E)  Is 0.3.

Question 18

Internal users of financial information:

Accepted Answer

A)  Are those individuals involved in managing and operating the company. 
B)  Include directors and customers. 
C)  Include shareholders and lenders. 
D)  Are not directly involved in running a company. 
E)  Include suppliers, regulators, and the press. 
A)  Are those individuals involved in managing and operating the company. 
B)  Include directors and customers. 
C)  Include shareholders and lenders. 
D)  Are not directly involved in running a company. 
E)  Include suppliers, regulators, and the press.

Question 19

The days' sales uncollected ratio measures the liquidity of receivables.

Accepted Answer

A) True 
 B)False

Question 20

The ratio of a company's book value of pledged assets to the book value of its secured liabilities is called the:

Accepted Answer

A)  Times secured liabilities earned. 
B)  Debt ratio. 
C)  Pledged assets to secured liabilities. 
D)  Profit margin. 
E)  Return on total assets. 
A)  Times secured liabilities earned. 
B)  Debt ratio. 
C)  Pledged assets to secured liabilities. 
D)  Profit margin. 
E)  Return on total assets.

Showdown Co. had net sales of $680,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 10.6.

The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Protection Co. had net sales of $10,500 million. Its average account receivables were$1,750 million. Its accounts receivable turnover was 6.

The ability to provide financial rewards sufficient to attract and retain financing is called:

Horizontal statement analysis is used to reveal changes in the relative importance of each financial statement item.

Intercompany analysis is based on internal comparisons.

Dividend yield measures:

A company's board of directors analyzes financial statements to assess future company prospects for investing and lending decisions.

Total asset turnover is calculated by dividing:

The quick assets are:

The merchandise turnover ratio is used to measure profitability.

The current ratio:

The pledged assets to secured liabilities ratio:

Days' sales in inventory is calculated by:

Ratios that measure solvency include:

The current ratio:

CrossSports had interest expense of $12,000 and its income before interest and income taxes was $28,000. Its times interest earned ratio:

Internal users of financial information:

The days' sales uncollected ratio measures the liquidity of receivables.

The ratio of a company's book value of pledged assets to the book value of its secured liabilities is called the:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Filters

Exam 17: Analyzing Financial Statements

Showdown Co. had net sales of $680,000 and average accounts receivable of $64,000. Its accounts receivable turnover was 10.6.

The higher the debt ratio the higher the level of risk of not being able to meet obligations.

Protection Co. had net sales of $10,500 million. Its average account receivables were$1,750 million. Its accounts receivable turnover was 6.

The ability to provide financial rewards sufficient to attract and retain financing is called:

Horizontal statement analysis is used to reveal changes in the relative importance of each financial statement item.

Intercompany analysis is based on internal comparisons.

Dividend yield measures:

A company's board of directors analyzes financial statements to assess future company prospects for investing and lending decisions.

Total asset turnover is calculated by dividing:

The quick assets are:

The merchandise turnover ratio is used to measure profitability.

The current ratio:

The pledged assets to secured liabilities ratio:

Days' sales in inventory is calculated by:

Ratios that measure solvency include:

The current ratio:

CrossSports had interest expense of $12,000 and its income before interest and income taxes was $28,000. Its times interest earned ratio:

Internal users of financial information:

The days' sales uncollected ratio measures the liquidity of receivables.

The ratio of a company's book value of pledged assets to the book value of its secured liabilities is called the:

Property, Plant and Equipment and Intangibles

Current Liabilities

Partnerships

Organization and Operation of Corporations

Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings

Bonds and Long-Term Notes Payable

Accounting for Debt and Share Investments

Reporting and Analyzing Cash Flows

Filters