Question 1

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

Accepted Answer

A) True 
 B)False

Question 2

An advantage of the current ratio is that it considers the makeup of the current assets.

Accepted Answer

A) True 
 B)False

Question 3

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 rate earned on total assets for Diane Company?

Accepted Answer

A)  10.0% 
B)  8.0% 
C)  0.10% 
D)  1.0% 
A)  10.0% 
B)  8.0% 
C)  0.10% 
D)  1.0%

Question 4

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

Accepted Answer

A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity 
A)  solvency and leverage 
B)  solvency and profitability 
C)  solvency and liquidity 
D)  solvency and equity

Question 5

A common measure of liquidity is

Accepted Answer

A)  the ratio of sales to assets 
B)  dividends per share of common stock 
C)  the accounts receivable turnover 
D)  the profit margin 
A)  the ratio of sales to assets 
B)  dividends per share of common stock 
C)  the accounts receivable turnover 
D)  the profit margin

Question 6

Match between columns
                        Premises: an analysis of a company's ability to pay its current liabilities
an event or transaction that is both unusual and infrequent
occurs when a company abandons a segment
a percentage analysis of increases and decreases in related items on comparative financial statements
requires a restatement of prior-period financial statements
focuses on a company's ability to generate net income
useful for comparing one company to another or a company with industry averages
the percentage analysis of the relationship of each component in a financial statement to a total within the statement

Accepted Answer

The Answer of discontinued operations and current position analysis and is...

Question 7

Which of the following is required by the Sarbanes-Oxley Act?

Accepted Answer

A)  a price-earnings ratio 
B)  a report on internal control 
C)  a vertical analysis 
D)  a  common-sized statement 
A)  a price-earnings ratio 
B)  a report on internal control 
C)  a vertical analysis 
D)  a  common-sized statement

Question 8

When computing the rate earned on total common stockholders' equity, preferred stock dividends are subtracted from net income.

Accepted Answer

A) True 
 B)False

Question 9

The following information has been condensed from the December 31 balance sheets of Gabriel Co.:   
(a) Determine the ratio of fixed assets to long-term liabilities for each year. 
(b) Determine the ratio of liabilities to stockholders' equity for each year. 
(c) Comment on the year-to-year changes for both ratios. 
Round your answers to two decimal places.

Accepted Answer

(a) @#IMG-DLM& 
(b) @#IMG-DLM& 
(c) In the second year, ther

Question 10

The following data are taken from the financial statements:   
(a) Assuming that credit terms on all sales are n/45, determine for each year (1) the accounts receivable turnover and (2) the number of days' sales in receivables. 
Round intermediate calculations to whole numbers and final answers to two decimal places. 
(b) Comment on any significant trends revealed by the data.

Accepted Answer

(a) @#IMG-DLM& 
(b) Although sales increased durin

Question 11

Horizontal analysis of comparative financial statements includes

Accepted Answer

A)  development of common-sized statements 
B)  calculation of liquidity ratios 
C)  calculation of dollar amount changes and percentage changes from the previous to the current year 
D)  evaluation of each component in a financial statement to a total within the statement 
A)  development of common-sized statements 
B)  calculation of liquidity ratios 
C)  calculation of dollar amount changes and percentage changes from the previous to the current year 
D)  evaluation of each component in a financial statement to a total within the statement

Question 12

An extraordinary item can result from

Accepted Answer

A)  a segment of the business being sold 
B)  corporate income tax being paid 
C)  a change from one accounting method to another acceptable accounting method 
D)  a transaction or event that is unusual and occurs infrequently 
A)  a segment of the business being sold 
B)  corporate income tax being paid 
C)  a change from one accounting method to another acceptable accounting method 
D)  a transaction or event that is unusual and occurs infrequently

Question 13

Hsu Company reported the following on its income statement:   Interest expense was $80,000.  Hsu Company's times interest earned is

Accepted Answer

A)  8 times 
B)  6.25 times 
C)  5.25 times 
D)  5 times 
A)  8 times 
B)  6.25 times 
C)  5.25 times 
D)  5 times

Question 14

A clean audit opinion is the same as a qualified audit opinion.

Accepted Answer

A) True 
 B)False

Question 15

In a common-sized income statement, each item is expressed as a percentage of net income.

Accepted Answer

A) True 
 B)False

Question 16

Based on the above data, what is the amount of working capital?

Accepted Answer

A)  $213,000 
B)  $113,000 
C)  $153,000 
D)  $39,000 
A)  $213,000 
B)  $113,000 
C)  $153,000 
D)  $39,000

Question 17

The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit.        
What is the rate earned on total assets for this company?

Accepted Answer

A)  8.1% 
B)  6.8% 
C)  10.5% 
D)  16.1% 
A)  8.1% 
B)  6.8% 
C)  10.5% 
D)  16.1%

Question 18

A company reported the following:   
Calculate the company's price-earnings ratio.  Round your answer to one decimal place.

Accepted Answer

Price-earnings ratio = Market price per

Question 19

The number of times interest expense is earned is computed as

Accepted Answer

A)  net income plus interest expense, divided by interest expense 
B)  income before income tax plus interest expense, divided by interest expense 
C)  net income divided by interest expense 
D)  income before income tax divided by interest expense 
A)  net income plus interest expense, divided by interest expense 
B)  income before income tax plus interest expense, divided by interest expense 
C)  net income divided by interest expense 
D)  income before income tax divided by interest expense

Question 20

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

Accepted Answer

A) True 
 B)False

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

An advantage of the current ratio is that it considers the makeup of the current assets.

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 rate earned on total assets for Diane Company?

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

A common measure of liquidity is

Which of the following is required by the Sarbanes-Oxley Act?

When computing the rate earned on total common stockholders' equity, preferred stock dividends are subtracted from net income.

Horizontal analysis of comparative financial statements includes

An extraordinary item can result from

Hsu Company reported the following on its income statement: Interest expense was $80,000. Hsu Company's times interest earned is

A clean audit opinion is the same as a qualified audit opinion.

In a common-sized income statement, each item is expressed as a percentage of net income.

Based on the above data, what is the amount of working capital?

The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the rate earned on total assets for this company?

A company reported the following: Calculate the company's price-earnings ratio. Round your answer to one decimal place.

The number of times interest expense is earned is computed as

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

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

Solvency analysis focuses on the ability of a business to pay its current and noncurrent liabilities.

An advantage of the current ratio is that it considers the makeup of the current assets.

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 rate earned on total assets for Diane Company?

The ability of a business to pay its debts as they come due and to earn a reasonable net income is

A common measure of liquidity is

Which of the following is required by the Sarbanes-Oxley Act?

When computing the rate earned on total common stockholders' equity, preferred stock dividends are subtracted from net income.

Horizontal analysis of comparative financial statements includes

An extraordinary item can result from

Hsu Company reported the following on its income statement: Interest expense was $80,000. Hsu Company's times interest earned is

A clean audit opinion is the same as a qualified audit opinion.

In a common-sized income statement, each item is expressed as a percentage of net income.

Based on the above data, what is the amount of working capital?

The following information pertains to Newman Company. Assume that all balance sheet amounts represent both average and ending balance figures and that all sales were on credit. What is the rate earned on total assets for this company?

A company reported the following: Calculate the company's price-earnings ratio. Round your answer to one decimal place.

The number of times interest expense is earned is computed as

On a common-sized income statement, all items are stated as a percent of total assets or equities at year-end.

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