Question 1

A firm selling food should have higher inventory turnover rate than a firm selling office furniture.

Accepted Answer

A) True 
 B)False

Question 2

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Accepted Answer

A) True 
 B)False

Question 3

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

Accepted Answer

A) True 
 B)False

Question 4

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

Accepted Answer

A)  vertical analysis 
B)  horizontal analysis 
C)  liquidity analysis 
D)  solvency analysis 
A)  vertical analysis 
B)  horizontal analysis 
C)  liquidity analysis 
D)  solvency analysis

Question 5

The excess of current assets over current liabilities is referred to as working capital.

Accepted Answer

A) True 
 B)False

Question 6

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.

Accepted Answer

A) True 
 B)False

Question 7

If two companies have the same current ratio, their ability to pay short-term debt is the same.

Accepted Answer

A) True 
 B)False

Question 8

A loss due to a discontinued operation should be reported on the income statement

Accepted Answer

A)  above income from continuing operations 
B)  without related tax effect 
C)  below income from continuing operations 
D)  as an operating expense 
A)  above income from continuing operations 
B)  without related tax effect 
C)  below income from continuing operations 
D)  as an operating expense

Question 9

The analysis of increases and decreases in the amount and percentage of comparative financial statement items is referred to as horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 10

Assume the following sales data for a company:   What is the percentage increase in sales from the preceding year to the current year?

Accepted Answer

A)  70% 
B)  76.9% 
C)  30% 
D)  50% 
A)  70% 
B)  76.9% 
C)  30% 
D)  50%

Question 11

Comparative information taken from the Friction Company's financial statements is shown below:   
Using horizontal analysis, show the percentage change and direction (increase or decrease) from Year 1 to Year 2 with Year 1 as the base year.

Accepted Answer

(a) Base year is zero.  Not possible to

Question 12

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

Accepted Answer

A) True 
 B)False

Question 13

The following data are taken from the balance sheet at the end of the current year.   
Determine: 
(a) working capital
(b) current ratio
(c) quick ratio.
Round ratios to the nearest tenth.

Accepted Answer

(a) Current assets ($969,000) - Current

Question 14

Revenue and expense data for Young Technologies are as follows:   
(a) Prepare an income statement in comparative form, stating each item for both years as an amount and as a percent of sales. Round to the nearest whole percent. 
(b) Comment on the significant changes disclosed by the comparative income statement.

Accepted Answer

(a) @#IMG-DLM& 
(b) The vertical analysis indicate

Question 15

Leverage implies that a company

Accepted Answer

A)  contains debt financing 
B)  contains equity financing 
C)  has a high current ratio 
D)  has a high earnings per share 
A)  contains debt financing 
B)  contains equity financing 
C)  has a high current ratio 
D)  has a high earnings per share

Question 16

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.        
What is the ratio of sales to total assets for Diane Company?

Accepted Answer

A)  1.00 
B)  2.94 
C)  0.18 
D)  0.34 
A)  1.00 
B)  2.94 
C)  0.18 
D)  0.34

Question 17

The numerator of the rate earned on total assets ratio is

Accepted Answer

A)  net income 
B)  net income plus tax expense 
C)  net income plus interest expense 
D)  net income minus preferred dividends 
A)  net income 
B)  net income plus tax expense 
C)  net income plus interest expense 
D)  net income minus preferred dividends

Question 18

A company reports the following:   
Determine the ratio of sales to assets.  Round your answer to one decimal place.

Accepted Answer

Ratio of sales to assets = Sal

Question 19

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

Accepted Answer

A)  decrease 
B)  remain the same 
C)  either increase or decrease 
D)  increase 
A)  decrease 
B)  remain the same 
C)  either increase or decrease 
D)  increase

Question 20

If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

Accepted Answer

A) True 
 B)False

A firm selling food should have higher inventory turnover rate than a firm selling office furniture.

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

The excess of current assets over current liabilities is referred to as working capital.

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.

If two companies have the same current ratio, their ability to pay short-term debt is the same.

A loss due to a discontinued operation should be reported on the income statement

The analysis of increases and decreases in the amount and percentage of comparative financial statement items is referred to as horizontal analysis.

Assume the following sales data for a company: What is the percentage increase in sales from the preceding year to the current year?

Comparative information taken from the Friction Company's financial statements is shown below: Using horizontal analysis, show the percentage change and direction (increase or decrease) from Year 1 to Year 2 with Year 1 as the base year.

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

The following data are taken from the balance sheet at the end of the current year. Determine: (a) working capital (b) current ratio (c) quick ratio. Round ratios to the nearest tenth.

Leverage implies that a company

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the ratio of sales to total assets for Diane Company?

The numerator of the rate earned on total assets ratio is

A company reports the following: Determine the ratio of sales to assets. Round your answer to one decimal place.

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Filters

Exam 14: Financial Statement Analysis

A firm selling food should have higher inventory turnover rate than a firm selling office furniture.

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year, there has been an acceleration in the collection of receivables.

Using measures to assess a business's ability to pay its current liabilities is called current position analysis.

An analysis in which all the components of an income statement are expressed as a percentage of sales is a

The excess of current assets over current liabilities is referred to as working capital.

When the rate of return on total assets ratio is greater than the rate of return on common stockholders' equity ratio, the management of the company has effectively used leverage.

If two companies have the same current ratio, their ability to pay short-term debt is the same.

A loss due to a discontinued operation should be reported on the income statement

The analysis of increases and decreases in the amount and percentage of comparative financial statement items is referred to as horizontal analysis.

Assume the following sales data for a company: What is the percentage increase in sales from the preceding year to the current year?

Comparative information taken from the Friction Company's financial statements is shown below: Using horizontal analysis, show the percentage change and direction (increase or decrease) from Year 1 to Year 2 with Year 1 as the base year.

If a firm has a quick ratio of 1, the subsequent payment of an account payable will cause the ratio to increase.

The following data are taken from the balance sheet at the end of the current year. Determine: (a) working capital (b) current ratio (c) quick ratio. Round ratios to the nearest tenth.

Leverage implies that a company

The following information pertains to Diane Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the ratio of sales to total assets for Diane Company?

The numerator of the rate earned on total assets ratio is

A company reports the following: Determine the ratio of sales to assets. Round your answer to one decimal place.

An acceleration in the collection of receivables will tend to cause the accounts receivable turnover to

If a company has issued only one class of stock, the earnings per share are determined by dividing net income plus interest expense by the number of shares outstanding.

Introduction to Managerial Accounting

Job Order Costing

Process Cost Systems

Activity Based Costing

Cost Volume Profit Analysis

Variable Costing for Management Analysis

Budgeting

Evaluating Variances From Standard Costs

Evaluating Decentralized Operations

Differential Analysis and Product Pricing

Capital Investment Analysis

Lean Manufacturing and Activity Analysis

Statement of Cash Flows

Filters