Question 1

A retailing firm has which type of inventory?

Accepted Answer

A)  raw materials 
B)  work in process 
C)  merchandise 
D)  raw materials and merchandise 
E)  raw materials, work in process, and merchandise 
A)  raw materials 
B)  work in process 
C)  merchandise 
D)  raw materials and merchandise 
E)  raw materials, work in process, and merchandise

Question 2

Statements in which all items are expressed only in relative terms (percentages of a base) are termed:

Accepted Answer

A)  Vertical Statements 
B)  Horizontal Statements 
C)  Funds Statements 
D)  Common-Size Statements 
E)  none of the answers are correct 
A)  Vertical Statements 
B)  Horizontal Statements 
C)  Funds Statements 
D)  Common-Size Statements 
E)  none of the answers are correct

Question 3

Absolute figures and ratios are close to being meaningless unless compared to another figure.

Accepted Answer

A) True 
 B)False

Question 4

A manufacturing firm will most likely have the heaviest investment in which type of assets?

Accepted Answer

A)  cash 
B)  inventory 
C)  accounts receivable 
D)  investments 
E)  plant, property, and equipment 
A)  cash 
B)  inventory 
C)  accounts receivable 
D)  investments 
E)  plant, property, and equipment

Question 5

A given ratio is always computed the same way, no matter what the source.

Accepted Answer

A) True 
 B)False

Question 6

Typically, the largest expense to a manufacturing firm is cost of goods sold.

Accepted Answer

A) True 
 B)False

Question 7

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

Accepted Answer

A) True 
 B)False

Question 8

There is a standard list of ratios.

Accepted Answer

A) True 
 B)False

Question 9

The principal asset of a merchandising firm will usually be accounts receivable.

Accepted Answer

A) True 
 B)False

Question 10

Different accounting methods can cause some ratios to differ substantially.

Accepted Answer

A) True 
 B)False

Question 11

Absolute figures usually have more meaning than ratio comparisons.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following is a false statement as it relates to analysis?

Accepted Answer

A)  Profitability may not be a major consideration as long as the resources for repayment can be projected. 
B)  Equity capital provides creditors with a cushion against loss. 
C)  There is a difference between the objectives that are sought by short-term grantors of credit and those sought by long-term grantors of credit. 
D)  If merchandise with a 20% markup is sold on credit, it would take ten successful sales of the same amount to make up for one sale not collected. 
E)  The financial structure of the entity is of interest to creditors. 
A)  Profitability may not be a major consideration as long as the resources for repayment can be projected. 
B)  Equity capital provides creditors with a cushion against loss. 
C)  There is a difference between the objectives that are sought by short-term grantors of credit and those sought by long-term grantors of credit. 
D)  If merchandise with a 20% markup is sold on credit, it would take ten successful sales of the same amount to make up for one sale not collected. 
E)  The financial structure of the entity is of interest to creditors.

Question 13

When performing year-to-year change analysis, a meaningful percent change cannot be computed when one number is positive and the other number is negative.

Accepted Answer

A) True 
 B)False

Question 14

Based on the terms of the credit and the purpose, the objectives of financial statement analysis by creditors will vary.

Accepted Answer

A) True 
 B)False

Question 15

Common-size analysis involves expressing comparisons in percentages.

Accepted Answer

A) True 
 B)False

Question 16

Denver Dynamics has net income of $2,000,000.Oakland Enterprises has net income of $2,500,000.Which of the following best compares the profitability of Denver and Oakland?

Accepted Answer

A)  Oakland Enterprises is 25% more profitable than Denver Dynamics. 
B)  Oakland Enterprises is more profitable than Denver Dynamics, but the comparison can't be quantified. 
C)  Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics. 
D)  Further information is needed for a reasonable comparison. 
E)  Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics. 
A)  Oakland Enterprises is 25% more profitable than Denver Dynamics. 
B)  Oakland Enterprises is more profitable than Denver Dynamics, but the comparison can't be quantified. 
C)  Oakland Enterprises is only more profitable if it is smaller than Denver Dynamics. 
D)  Further information is needed for a reasonable comparison. 
E)  Oakland Enterprises is more profitable if it is a larger firm than Denver Dynamics.

Question 17

Which of the following statements is incorrect?

Accepted Answer

A)  The North American Industry Classification System (NAICS) was created jointly by the United States, Canada, and Mexico. 
B)  For the NAICS, economic units with similar production processes are classified in the same industry, and the lines drawn between industries demarcate differences in production processes. 
C)  NAICS provides enhanced industry comparability among the three NAFTA trading partners. 
D)  NAICS divides the economy into twenty sectors. 
E)  In most sectors, NAICS provides for compatibility at the industry (six-digit) level. 
A)  The North American Industry Classification System (NAICS) was created jointly by the United States, Canada, and Mexico. 
B)  For the NAICS, economic units with similar production processes are classified in the same industry, and the lines drawn between industries demarcate differences in production processes. 
C)  NAICS provides enhanced industry comparability among the three NAFTA trading partners. 
D)  NAICS divides the economy into twenty sectors. 
E)  In most sectors, NAICS provides for compatibility at the industry (six-digit) level.

Question 18

Which of the following would not be a user of financial statements?

Accepted Answer

A)  management 
B)  bankers 
C)  employee unions 
D)  investment analysts 
E)  all of the above are users 
A)  management 
B)  bankers 
C)  employee unions 
D)  investment analysts 
E)  all of the above are users

A retailing firm has which type of inventory?

Statements in which all items are expressed only in relative terms (percentages of a base) are termed:

Absolute figures and ratios are close to being meaningless unless compared to another figure.

A manufacturing firm will most likely have the heaviest investment in which type of assets?

A given ratio is always computed the same way, no matter what the source.

Typically, the largest expense to a manufacturing firm is cost of goods sold.

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

There is a standard list of ratios.

The principal asset of a merchandising firm will usually be accounts receivable.

Different accounting methods can cause some ratios to differ substantially.

Absolute figures usually have more meaning than ratio comparisons.

Which of the following is a false statement as it relates to analysis?

When performing year-to-year change analysis, a meaningful percent change cannot be computed when one number is positive and the other number is negative.

Based on the terms of the credit and the purpose, the objectives of financial statement analysis by creditors will vary.

Common-size analysis involves expressing comparisons in percentages.

Denver Dynamics has net income of $2,000,000.Oakland Enterprises has net income of $2,500,000.Which of the following best compares the profitability of Denver and Oakland?

Which of the following statements is incorrect?

Which of the following would not be a user of financial statements?

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 5: Basics of Analysis

A retailing firm has which type of inventory?

Statements in which all items are expressed only in relative terms (percentages of a base) are termed:

Absolute figures and ratios are close to being meaningless unless compared to another figure.

A manufacturing firm will most likely have the heaviest investment in which type of assets?

A given ratio is always computed the same way, no matter what the source.

Typically, the largest expense to a manufacturing firm is cost of goods sold.

Liquidity ratios measure the degree of protection of long-term suppliers of funds.

There is a standard list of ratios.

The principal asset of a merchandising firm will usually be accounts receivable.

Different accounting methods can cause some ratios to differ substantially.

Absolute figures usually have more meaning than ratio comparisons.

Which of the following is a false statement as it relates to analysis?

When performing year-to-year change analysis, a meaningful percent change cannot be computed when one number is positive and the other number is negative.

Based on the terms of the credit and the purpose, the objectives of financial statement analysis by creditors will vary.

Common-size analysis involves expressing comparisons in percentages.

Denver Dynamics has net income of $2,000,000.Oakland Enterprises has net income of $2,500,000.Which of the following best compares the profitability of Denver and Oakland?

Which of the following statements is incorrect?

Which of the following would not be a user of financial statements?

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Liquidity of Short-Term Assets; Related Debt-Paying Ability

Long-Term Debt-Paying Ability

Profitability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, Utilities, Oil and Gas, Transportation, Insurance, Real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters