Question 1

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

Accepted Answer

When percentages are utilized rather tha

Question 2

In computing the ratio of sales to assets, long-term investments are excluded from average total assets.

Accepted Answer

A) True 
 B)False

Question 3

In a common-sized income statement, 100% is the

Accepted Answer

A)  net cost of goods sold 
B)  net income 
C)  gross profit 
D)  sales 
A)  net cost of goods sold 
B)  net income 
C)  gross profit 
D)  sales

Question 4

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

Accepted Answer

Ford Motor Company is an automobile manu

Question 5

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

Accepted Answer

A) True 
 B)False

Question 6

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

Accepted Answer

A) True 
 B)False

Question 7

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Accepted Answer

A)  $845,000 
B)  $595,000 
C)  $720,000 
D)  $125,000 
A)  $845,000 
B)  $595,000 
C)  $720,000 
D)  $125,000

Question 8

Which of the following is not a characteristic evaluated in ratio analysis?

Accepted Answer

A)  liquidity 
B)  profitability 
C)  solvency 
D)  marketability 
A)  liquidity 
B)  profitability 
C)  solvency 
D)  marketability

Question 9

Which of the following items should be classified as an extraordinary item on an income statement?

Accepted Answer

A)  gain on the retirement of a bond payable 
B)  loss from hurricane damage in Iowa 
C)  loss due to a discontinued operation in Colorado 
D)  selling treasury stock for more than the company paid for it 
A)  gain on the retirement of a bond payable 
B)  loss from hurricane damage in Iowa 
C)  loss due to a discontinued operation in Colorado 
D)  selling treasury stock for more than the company paid for it

Question 10

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

Accepted Answer

A) True 
 B)False

Question 11

Selected data from the Carmen Company at year end are presented below:   
Calculate: 
(a) ratio of sales to assets; 
(b) rate earned on total assets; 
(c) rate earned on common stockholders' 
equity; 
(d) earnings per share on common stock. Assume the company had no preferred stock or interest 
expense. Round percentage values to one decimal place and dollar values to zero decimal place.

Accepted Answer

With the information

Question 12

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

Accepted Answer

A) True 
 B)False

Question 13

The independent auditor's report

Accepted Answer

A)  describes which financial statements are covered by the audit 
B)  gives the auditor's opinion regarding the fairness of the financial statements 
C)  summarizes what the auditor did 
D)  states that the financial statements were presented on time 
A)  describes which financial statements are covered by the audit 
B)  gives the auditor's opinion regarding the fairness of the financial statements 
C)  summarizes what the auditor did 
D)  states that the financial statements were presented on time

Question 14

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

Accepted Answer

A) True 
 B)False

Question 15

The following information is available for Jase Company:   Which of the following statements is correct?

Accepted Answer

A)  The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. 
B)  The price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year. 
C)  The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year. 
D)  The market price per share and the earnings per share are not statistically related to each other. 
A)  The price-earnings ratio is 20 and a share of common stock was selling for 20 times the amount of earnings per share at the end of the year. 
B)  The price-earnings ratio is 5% and a share of common stock was selling for 5% more than the amount of earnings per share at the end of the year. 
C)  The price-earnings ratio is 10 and a share of common stock was selling for 125 times the amount of earnings per share at the end of the year. 
D)  The market price per share and the earnings per share are not statistically related to each other.

Question 16

A change from one acceptable accounting method to another is reported

Accepted Answer

A)  on the statement of retained earnings, as a correction to the beginning balance 
B)  on the income statement, below income from continuing operations 
C)  on the income statement, above income from continuing operations 
D)  through a retroactive restatement of prior-period earnings 
A)  on the statement of retained earnings, as a correction to the beginning balance 
B)  on the income statement, below income from continuing operations 
C)  on the income statement, above income from continuing operations 
D)  through a retroactive restatement of prior-period earnings

Question 17

Which of the following is the most useful in analyzing companies of different sizes?

Accepted Answer

A)  comparative statements 
B)  common-sized financial statements 
C)  price-level accounting 
D)  audit report 
A)  comparative statements 
B)  common-sized financial statements 
C)  price-level accounting 
D)  audit report

Question 18

A company reports the following:   
Determine:
(a) accounts receivable turnover
(b) number of days' sales in receivables. 
Round your answer to one decimal place.

Accepted Answer

(a) Accounts receivable turnover = Sales

Question 19

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

Accepted Answer

A) True 
 B)False

Question 20

The following information was taken from Slater Company's balance sheet:   
Determine the company's 
(a) ratio of fixed assets to long-term liabilities and 
(b) ratio of liabilities to stockholders' equity.  
Round your answer to one decimal place.

Accepted Answer

(a) Ratio of fixed assets to long-term l

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

In computing the ratio of sales to assets, long-term investments are excluded from average total assets.

In a common-sized income statement, 100% is the

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Which of the following is not a characteristic evaluated in ratio analysis?

Which of the following items should be classified as an extraordinary item on an income statement?

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

The independent auditor's report

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

The following information is available for Jase Company: Which of the following statements is correct?

A change from one acceptable accounting method to another is reported

Which of the following is the most useful in analyzing companies of different sizes?

A company reports the following: Determine: (a) accounts receivable turnover (b) number of days' sales in receivables. Round your answer to one decimal place.

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

The following information was taken from Slater Company's balance sheet: Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. Round your answer to one decimal place.

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

What is a major advantage of using percentages rather than dollar changes in doing horizontal and vertical analysis?

In computing the ratio of sales to assets, long-term investments are excluded from average total assets.

In a common-sized income statement, 100% is the

Why would you or why wouldn't you compare an organization like Ford Motor Company to the local car dealer "Johnson City Ford/Lincoln/Mercury" in vertical and horizontal analysis?

In the vertical analysis of a balance sheet, the base for current liabilities is total liabilities.

A decrease in the ratio of liabilities to stockholders' equity indicates an improvement in the margin of safety for creditors.

A company with working capital of $720,000 and a current ratio of 2.2 pays a $125,000 short-term liability. The amount of working capital immediately after payment is

Which of the following is not a characteristic evaluated in ratio analysis?

Which of the following items should be classified as an extraordinary item on an income statement?

Interpreting financial analysis should be considered in light of conditions peculiar to the industry and the general economic conditions.

The number of days' sales in inventory is one means of expressing the relationship between the cost of goods sold and inventory.

The independent auditor's report

The ratio of the sum of cash, receivables, and marketable securities to current liabilities is referred to as the current ratio.

The following information is available for Jase Company: Which of the following statements is correct?

A change from one acceptable accounting method to another is reported

Which of the following is the most useful in analyzing companies of different sizes?

A company reports the following: Determine: (a) accounts receivable turnover (b) number of days' sales in receivables. Round your answer to one decimal place.

The ratio of the market price per share of common stock on a specific date to the annual earnings per share is referred to as the price-earnings ratio.

The following information was taken from Slater Company's balance sheet: Determine the company's (a) ratio of fixed assets to long-term liabilities and (b) ratio of liabilities to stockholders' equity. Round your answer to one decimal place.

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