Question 1

For what purpose is horizontal analysis used by management? Is this information provided to stockholders? If so, in what form? If not, why?

Accepted Answer

Horizontal analysis is used to track the

Question 2

Squid Lips, Inc. wants to measure the relationship between profitability and the investment made by stockholders. Squid Lips should use the

Accepted Answer

A)  return on stockholders' equity ratio. 
B)  earnings per share. 
C)  profit margin. 
D)  statement of retained earnings. 
A)  return on stockholders' equity ratio. 
B)  earnings per share. 
C)  profit margin. 
D)  statement of retained earnings.

Question 3

Which combination of ratios will best analyze Stetson's income statement performance?

Accepted Answer

A)  Earnings per share, gross profit, and profit margin ratio 
B)  Gross profit ratio, return on common stockholders' equity ratio, debt-to-equity ratio 
C)  Debt-to-equity ratio, gross profit ratio, and profit margin ratio 
D)  Current ratio, gross profit ratio, and return on common stockholders' equity ratio 
A)  Earnings per share, gross profit, and profit margin ratio 
B)  Gross profit ratio, return on common stockholders' equity ratio, debt-to-equity ratio 
C)  Debt-to-equity ratio, gross profit ratio, and profit margin ratio 
D)  Current ratio, gross profit ratio, and return on common stockholders' equity ratio

Question 4

Analysts trying to make investment decisions may very well ignore discontinued operations, and extraordinary items.

Accepted Answer

A) True 
 B)False

Question 5

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may
not be willing to pay, while inventory need only be sold in a retail store.

Accepted Answer

A) True 
 B)False

Question 6

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Accepted Answer

A) True 
 B)False

Question 7

The following information was summarized from the balance sheets of the Better Books and Tenacious Texts at December 31, 2016:
   REQUIRED:
1. Using the information provided, compute the following for each company at the end of 2016:
a. Current ratio
b. Quick ratio
2. Better Books reported cash flow from operations of $7,500 million during 2016. Tenacious Texts reported cash flow from operations of $7,000 million. Current liabilities reported by Better Books and Tenacious Texts at December 31, 2015, were $13,200 million and $7,700 million, respectively. Compute the cash flow from operations to current liabilities ratio for each company for 2016.
3. Comment briefly on the liquidity of each of these two companies. Which appears to be more liquid?
4. What other ratios would help you more fully assess the liquidity of these companies?

Accepted Answer

1. Calculations all dollar amounts in mi

Question 8

Which of the following will decrease working capital?

Accepted Answer

A)  Collection of accounts receivable 
B)  Purchase of a new computer with cash 
C)  Payment of salaries payable 
D)  Purchase of merchandise on credit 
A)  Collection of accounts receivable 
B)  Purchase of a new computer with cash 
C)  Payment of salaries payable 
D)  Purchase of merchandise on credit

Question 9

Which of the following is considered a liquidity analysis tool?

Accepted Answer

A)  Gross profit ratio 
B)  Acid-test ratio 
C)  Dividend yield ratio 
D)  Return on assets ratio 
A)  Gross profit ratio 
B)  Acid-test ratio 
C)  Dividend yield ratio 
D)  Return on assets ratio

Question 10

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply.
-Asset turnover ratio

Accepted Answer

A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Net income
G) Total liabilities
H) Total assets 
A)  Market price per share 
B)  Net sales 
C)  Gross profit 
D)  Average total assets 
E)  Interest expense, net of tax
F) Net income
G) Total liabilities
H) Total assets

Question 11

Back Company sold merchandise on credit. Its gross profit ratio is 23%. The effect of this transaction is that the

Accepted Answer

A)  earnings per share decreased. 
B)  current ratio was unchanged. 
C)  debt-to-equity ratio increased. 
D)  earnings per share increased. 
A)  earnings per share decreased. 
B)  current ratio was unchanged. 
C)  debt-to-equity ratio increased. 
D)  earnings per share increased.

Question 12

If two companies in the same industry use different methods to value inventory, this makes comparisons more difficult but not impossible.

Accepted Answer

A) True 
 B)False

Question 13

Select the term below most properly satisfies each statement.
-When using vertical analysis, accounts on the income statement should be stated as a percentage of this amount

Accepted Answer

A) Total assets 
B) Horizontal analysis 
C) Vertical analysis 
D) Net sales 
A) Total assets 
B) Horizontal analysis 
C) Vertical analysis 
D) Net sales

Question 14

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply.
-Debt service coverage ratio

Accepted Answer

A)  Interest expense 
B)  Income tax expense 
C)  Cash flow from operations before interest and tax payments 
D)  Cash paid for acquisitions 
E)  Cash flow from operations
F) Total dividends paid
G) Interest payments
H) Principal payments on debt 
A)  Interest expense 
B)  Income tax expense 
C)  Cash flow from operations before interest and tax payments 
D)  Cash paid for acquisitions 
E)  Cash flow from operations
F) Total dividends paid
G) Interest payments
H) Principal payments on debt

Question 15

Presented below are selected data from the financial statements of Parade Corp.

Accepted Answer

The answer of Presented below are selected data from the...

Question 16

Pinecrest Company
Use the selected data from Pinecrest Company's financial statements to answer the following question.
  
-Refer to the data for Pinecrest Company. Which of the following statements is true?

Accepted Answer

A)  Net income must be at least $36,000 for 2016. 
B)  Net income must be less than $36,000 for 2016. 
C)  Cash flows from operating activities is twice as large as net income for 2016. 
D)  The amount of net income for 2016 cannot be determined based on the data provided. 
A)  Net income must be at least $36,000 for 2016. 
B)  Net income must be less than $36,000 for 2016. 
C)  Cash flows from operating activities is twice as large as net income for 2016. 
D)  The amount of net income for 2016 cannot be determined based on the data provided.

Question 17

Why is liquidity important for businesses?

Accepted Answer

Liquidity is a relative measure of the n

Question 18

What makes the analysis of a service company different from the analysis of a merchandising company?

Accepted Answer

A service company has a different operat

Question 19

The Stockholders' Equity section of the balance sheet for Brompton Construction Company at the end of 2016 is as
follows:
   The lower portion of the 2016 income statement indicates the following:
   Assume that the number of shares outstanding did not change during the year.
REQUIRED:
1. Compute earnings per share before extraordinary items.
2. Compute earnings per share after the extraordinary loss.
3. Which of the two EPS ratios is more useful to management? Explain your answer. Would your answer be different if the ratios were to be used by an outsider, like a potential stockholder? Why or why not?

Accepted Answer

1. Earnings per Share before extraordina

Question 20

For each of the following sentences, select the phrase or group of words that best completes the statement.
-The percentage of earnings paid out as dividends.

Accepted Answer

A) Earnings per share 
B) Dividend yield ratio 
C) Dividend payout ratio 
D) Leverage 
E) Return on assets ratio
F)Return on common stockholders' equity ratio
G)Debt-to-equity ratio
H)Price/earnings ratio 
A) Earnings per share 
B) Dividend yield ratio 
C) Dividend payout ratio 
D) Leverage 
E) Return on assets ratio
F)Return on common stockholders' equity ratio
G)Debt-to-equity ratio
H)Price/earnings ratio

For what purpose is horizontal analysis used by management? Is this information provided to stockholders? If so, in what form? If not, why?

Squid Lips, Inc. wants to measure the relationship between profitability and the investment made by stockholders. Squid Lips should use the

Which combination of ratios will best analyze Stetson's income statement performance?

Analysts trying to make investment decisions may very well ignore discontinued operations, and extraordinary items.

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay, while inventory need only be sold in a retail store.

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Which of the following will decrease working capital?

Which of the following is considered a liquidity analysis tool?

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply. -Asset turnover ratio

Back Company sold merchandise on credit. Its gross profit ratio is 23%. The effect of this transaction is that the

If two companies in the same industry use different methods to value inventory, this makes comparisons more difficult but not impossible.

Select the term below most properly satisfies each statement. -When using vertical analysis, accounts on the income statement should be stated as a percentage of this amount

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply. -Debt service coverage ratio

Presented below are selected data from the financial statements of Parade Corp.

Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question. -Refer to the data for Pinecrest Company. Which of the following statements is true?

Why is liquidity important for businesses?

What makes the analysis of a service company different from the analysis of a merchandising company?

For each of the following sentences, select the phrase or group of words that best completes the statement. -The percentage of earnings paid out as dividends.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International-Financial-Reporting-Standards

Filters

Exam 13: Financial Statement Analysis

For what purpose is horizontal analysis used by management? Is this information provided to stockholders? If so, in what form? If not, why?

Squid Lips, Inc. wants to measure the relationship between profitability and the investment made by stockholders. Squid Lips should use the

Which combination of ratios will best analyze Stetson's income statement performance?

Analysts trying to make investment decisions may very well ignore discontinued operations, and extraordinary items.

Inventory is more liquid than accounts receivable because receivables must be collected and some customers may not be willing to pay, while inventory need only be sold in a retail store.

The selection of a particular inventory valuation method has a significant effect on certain key ratios.

Which of the following will decrease working capital?

Which of the following is considered a liquidity analysis tool?

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply. -Asset turnover ratio

Back Company sold merchandise on credit. Its gross profit ratio is 23%. The effect of this transaction is that the

If two companies in the same industry use different methods to value inventory, this makes comparisons more difficult but not impossible.

Select the term below most properly satisfies each statement. -When using vertical analysis, accounts on the income statement should be stated as a percentage of this amount

Given below are several ratios. Select the accounts or amounts that would be used in order to calculate the ratio. You will have more than one response to each ratio. Some accounts or amounts may not be used at all. Select all that apply. -Debt service coverage ratio

Presented below are selected data from the financial statements of Parade Corp.

Pinecrest Company Use the selected data from Pinecrest Company's financial statements to answer the following question. -Refer to the data for Pinecrest Company. Which of the following statements is true?

Why is liquidity important for businesses?

What makes the analysis of a service company different from the analysis of a merchandising company?

For each of the following sentences, select the phrase or group of words that best completes the statement. -The percentage of earnings paid out as dividends.

Accounting As a Form of Communication

Financial Statements and the Annual Report

Processing Accounting Information

Income Measurement and Accrual Accounting

Inventories and Cost of Goods Sold

Cash and Internal Control

Receivables and Investments

Operating Assets: Property, Plant, and Equipment, and Intangibles

Current Liabilities, Contingencies, and the Time Value of Money

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

International-Financial-Reporting-Standards

Filters