Question 1

X-Caliber's income before interest and income taxes was $250,000 and its interest expense is $100,000. Its times interest earned ratio is .4.

Accepted Answer

A) True 
 B)False

Question 2

The purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency or effectiveness in providing products or services.

Accepted Answer

A) True 
 B)False

Question 3

Financial statement analysis:

Accepted Answer

A)  Helps users to make better decisions. 
B)  Is the application of analytical tools to general-purpose financial statements and related data for making business decisions. 
C)  Is the application of analytical tools to general-purpose financial statements and related data for making business decisions and helps users to make better decisions. 
D)  Lessens the need for expert judgment. 
E)  All of these answers are correct. 
A)  Helps users to make better decisions. 
B)  Is the application of analytical tools to general-purpose financial statements and related data for making business decisions. 
C)  Is the application of analytical tools to general-purpose financial statements and related data for making business decisions and helps users to make better decisions. 
D)  Lessens the need for expert judgment. 
E)  All of these answers are correct.

Question 4

Financial analysis refers to the communication of relevant financial information to decision makers.

Accepted Answer

A) True 
 B)False

Question 5

The dollar change for a financial statement is calculated by:

Accepted Answer

A)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
B)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
C)  Subtracting the base period amount from the analysis period amount. 
D)  Subtracting the analysis period amount from the base period amount. 
E)  Subtracting the base period amount from the analysis period amount, then dividing the result by the base amount. 
A)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
B)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
C)  Subtracting the base period amount from the analysis period amount. 
D)  Subtracting the analysis period amount from the base period amount. 
E)  Subtracting the base period amount from the analysis period amount, then dividing the result by the base amount.

Question 6

To calculate trend percents:

Accepted Answer

A)  Express financial numbers from other periods as a percent of the related base period number. 
B)  Select a base period and assign each item for the base period statement a weight of 100% and express financial numbers from other periods as a percent of the related base period number. 
C)  Select a base period and assign each item for the base period statement a weight of 100%. 
D)  Subtract the analysis period number from the base period number. 
E)  All of these answers are correct. 
A)  Express financial numbers from other periods as a percent of the related base period number. 
B)  Select a base period and assign each item for the base period statement a weight of 100% and express financial numbers from other periods as a percent of the related base period number. 
C)  Select a base period and assign each item for the base period statement a weight of 100%. 
D)  Subtract the analysis period number from the base period number. 
E)  All of these answers are correct.

Question 7

A traditional rule of thumb for an acceptable acid-test ratio and current ratio is 2 to 1 for the current ratio and 1 to 1 for the acid-test ratio.

Accepted Answer

A) True 
 B)False

Question 8

In some financial statements, most of the financial items on the statements are expressed as percentages of a selected base item. These percentages for two or more sequentialperiods are presented on:

Accepted Answer

A)  Constant dollar statements. 
B)  Common-size comparative statements. 
C)  All comparative statements. 
D)  Current cost statements. 
E)  Conventional financial statements. 
A)  Constant dollar statements. 
B)  Common-size comparative statements. 
C)  All comparative statements. 
D)  Current cost statements. 
E)  Conventional financial statements.

Question 9

Analysis measures taken from a selected competitor or group of competitors are often the best standards of comparisons.

Accepted Answer

A) True 
 B)False

Question 10

When a company goes into debt, the debt ratio provides information about the risk created for the company's owners and lenders.

Accepted Answer

A) True 
 B)False

Question 11

David Company had assets of $13,500,000, profit of $3,900,000, and net sales of$167,155,000. Its profit margin was 2.3%.

Accepted Answer

A) True 
 B)False

Question 12

The gross profit ratio:

Accepted Answer

A)  Measures the amount of gross profit in each dollar of sales. 
B)  Is a profitability measure. 
C)  Measures the relationship between net sales and cost of goods sold and is a profitability measure. 
D)  Measures the relationship between net sales and cost of goods sold. 
E)  All of these answers are correct. 
A)  Measures the amount of gross profit in each dollar of sales. 
B)  Is a profitability measure. 
C)  Measures the relationship between net sales and cost of goods sold and is a profitability measure. 
D)  Measures the relationship between net sales and cost of goods sold. 
E)  All of these answers are correct.

Question 13

Vertical analysis is a tool to evaluate individual financial statement items or group of items in terms of a specific base amount.

Accepted Answer

A) True 
 B)False

Question 14

Total asset turnover is used to evaluate:

Accepted Answer

A)  The relationship between asset cost and book value. 
B)  The number of times operating assets were sold during the year. 
C)  The necessity for asset replacement. 
D)  The efficiency of management's use of assets to generate sales. 
E)  The cash flows used to acquire assets. 
A)  The relationship between asset cost and book value. 
B)  The number of times operating assets were sold during the year. 
C)  The necessity for asset replacement. 
D)  The efficiency of management's use of assets to generate sales. 
E)  The cash flows used to acquire assets.

Question 15

Dairy King has total assets of $325 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.

Accepted Answer

A)  13.4% 
B)  38.6% 
C)  34.9% 
D)  14.9% 
E)  33.8% 
A)  13.4% 
B)  38.6% 
C)  34.9% 
D)  14.9% 
E)  33.8%

Question 16

Accounts receivable turnover measures:

Accepted Answer

A)  How often a company converts its average accounts receivable into cash during the period and the relationship of cash sales to credit sales. 
B)  How often a company converts its average accounts receivable into cash during the period. 
C)  The relationship of cash sales to credit sales. 
D)  How long it takes to sell inventory on credit. 
E)  How long it takes to sell inventory on credit and how often a company converts its average accounts receivable into cash during the period. 
A)  How often a company converts its average accounts receivable into cash during the period and the relationship of cash sales to credit sales. 
B)  How often a company converts its average accounts receivable into cash during the period. 
C)  The relationship of cash sales to credit sales. 
D)  How long it takes to sell inventory on credit. 
E)  How long it takes to sell inventory on credit and how often a company converts its average accounts receivable into cash during the period.

Question 17

The percent change in horizontal analysis is calculated by:

Accepted Answer

A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis period amount, then dividing the result by the base amount. 
A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis period amount, then dividing the result by the base amount.

Question 18

Ratios can be expressed as a percent, rate, or proportion.

Accepted Answer

A) True 
 B)False

Question 19

The profit margin ratio is gross profit divided by net sales.

Accepted Answer

A) True 
 B)False

Question 20

Analysis of a single financial item is important but is of limited value.

Accepted Answer

A) True 
 B)False

X-Caliber's income before interest and income taxes was $250,000 and its interest expense is $100,000. Its times interest earned ratio is .4.

The purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency or effectiveness in providing products or services.

Financial statement analysis:

Financial analysis refers to the communication of relevant financial information to decision makers.

The dollar change for a financial statement is calculated by:

To calculate trend percents:

A traditional rule of thumb for an acceptable acid-test ratio and current ratio is 2 to 1 for the current ratio and 1 to 1 for the acid-test ratio.

In some financial statements, most of the financial items on the statements are expressed as percentages of a selected base item. These percentages for two or more sequentialperiods are presented on:

Analysis measures taken from a selected competitor or group of competitors are often the best standards of comparisons.

When a company goes into debt, the debt ratio provides information about the risk created for the company's owners and lenders.

David Company had assets of $13,500,000, profit of $3,900,000, and net sales of$167,155,000. Its profit margin was 2.3%.

The gross profit ratio:

Vertical analysis is a tool to evaluate individual financial statement items or group of items in terms of a specific base amount.

Total asset turnover is used to evaluate:

Dairy King has total assets of $325 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.

Accounts receivable turnover measures:

The percent change in horizontal analysis is calculated by:

Ratios can be expressed as a percent, rate, or proportion.

The profit margin ratio is gross profit divided by net sales.

Analysis of a single financial item is important but is of limited value.

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

X-Caliber's income before interest and income taxes was $250,000 and its interest expense is $100,000. Its times interest earned ratio is .4.

The purpose of financial statement analysis for internal users is to provide information helpful in improving the company's efficiency or effectiveness in providing products or services.

Financial statement analysis:

Financial analysis refers to the communication of relevant financial information to decision makers.

The dollar change for a financial statement is calculated by:

To calculate trend percents:

A traditional rule of thumb for an acceptable acid-test ratio and current ratio is 2 to 1 for the current ratio and 1 to 1 for the acid-test ratio.

In some financial statements, most of the financial items on the statements are expressed as percentages of a selected base item. These percentages for two or more sequentialperiods are presented on:

Analysis measures taken from a selected competitor or group of competitors are often the best standards of comparisons.

When a company goes into debt, the debt ratio provides information about the risk created for the company's owners and lenders.

David Company had assets of $13,500,000, profit of $3,900,000, and net sales of$167,155,000. Its profit margin was 2.3%.

The gross profit ratio:

Vertical analysis is a tool to evaluate individual financial statement items or group of items in terms of a specific base amount.

Total asset turnover is used to evaluate:

Dairy King has total assets of $325 million. Its total liabilities are $110 million. Its equity is $315 million. Calculate the debt ratio.

Accounts receivable turnover measures:

The percent change in horizontal analysis is calculated by:

Ratios can be expressed as a percent, rate, or proportion.

The profit margin ratio is gross profit divided by net sales.

Analysis of a single financial item is important but is of limited value.

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