Question 1

The going-concern assumption is also known as the continuity assumption.

Accepted Answer

A) True 
 B)False  True

Question 2

Which of the following will not improve a company's gross profit percentage?

Accepted Answer

A)  An increase in the sales price 
B)  A decrease in the cost of inventory 
C)  A decrease in the shipping cost for merchandise purchased 
D)  Collecting cash from customers in advance 
A)  An increase in the sales price 
B)  A decrease in the cost of inventory 
C)  A decrease in the shipping cost for merchandise purchased 
D)  Collecting cash from customers in advance D

Question 3

Company X has net sales revenue of $1,250,000,cost of goods sold of $760,000,and all other expenses of $290,000.The beginning balance of stockholders' equity is $400,000 and the beginning balance of fixed assets is $361,000.The ending balance of stockholders' equity is $600,000 and the ending balance of fixed assets is $389,000.The fixed asset turnover ratio is closest to:

Accepted Answer

A)  0.53. 
B)  2.50. 
C)  3.33. 
D)  0.80. 
A)  0.53. 
B)  2.50. 
C)  3.33. 
D)  0.80. C

Question 4

Which of the following could indicate bad news?

Accepted Answer

A)  An increase in fixed asset turnover ratio 
B)  A decrease in days to sell 
C)  A decrease in EPS 
D)  A decrease in the debt-to-assets ratio 
A)  An increase in fixed asset turnover ratio 
B)  A decrease in days to sell 
C)  A decrease in EPS 
D)  A decrease in the debt-to-assets ratio

Question 5

The primary objective of financial accounting and reporting is to provide:

Accepted Answer

A)  useful information. 
B)  going concern information. 
C)  ratio analysis. 
D)  solvency. 
A)  useful information. 
B)  going concern information. 
C)  ratio analysis. 
D)  solvency.

Question 6

Which of the following types of items would you be most likely to see below the income tax expense line on an income statement?

Accepted Answer

A)  Gain on Sale of Discontinued Operations, Net of Tax 
B)  Gross Profit 
C)  Cumulative Effect of Accounting Change 
D)  Salaries Expense 
A)  Gain on Sale of Discontinued Operations, Net of Tax 
B)  Gross Profit 
C)  Cumulative Effect of Accounting Change 
D)  Salaries Expense

Question 7

Which of the following ratios is used to evaluate solvency?

Accepted Answer

A)  Fixed asset turnover ratio 
B)  Days to sell ratio 
C)  Current ratio 
D)  Times interest earned 
A)  Fixed asset turnover ratio 
B)  Days to sell ratio 
C)  Current ratio 
D)  Times interest earned

Question 8

Which of the following is calculated by dividing net revenue by average net fixed assets?

Accepted Answer

A)  Net profit margin 
B)  Fixed asset turnover 
C)  Total asset turnover 
D)  Current ratio 
A)  Net profit margin 
B)  Fixed asset turnover 
C)  Total asset turnover 
D)  Current ratio

Question 9

Horizontal analysis:

Accepted Answer

A)  is used to identify trends over time. 
B)  identifies the relative contribution made by each financial statement line item. 
C)  provides an understanding of the relationships among various items on financial statements. 
D)  involves comparing amounts across different financial statements. 
A)  is used to identify trends over time. 
B)  identifies the relative contribution made by each financial statement line item. 
C)  provides an understanding of the relationships among various items on financial statements. 
D)  involves comparing amounts across different financial statements.

Question 10

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n):

Accepted Answer

A)  reduction in the cost of goods sold. 
B)  decrease in inventory. 
C)  increase in inventory. 
D)  increase in sales revenue. 
A)  reduction in the cost of goods sold. 
B)  decrease in inventory. 
C)  increase in inventory. 
D)  increase in sales revenue.

Question 11

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

Accepted Answer

A)  Company A: Receivable turnover of 5; inventory turnover of 2 
B)  Company B: Receivable turnover of 2; inventory turnover of 5 
C)  Company C: Receivable turnover of 10; inventory turnover of 10 
D)  Company D: Receivable turnover of 1; inventory turnover of 1 
A)  Company A: Receivable turnover of 5; inventory turnover of 2 
B)  Company B: Receivable turnover of 2; inventory turnover of 5 
C)  Company C: Receivable turnover of 10; inventory turnover of 10 
D)  Company D: Receivable turnover of 1; inventory turnover of 1

Question 12

The following information comes from the balance sheets and income statements of the Rocket Company:
 
What is the times interest earned ratio for the current year?

Accepted Answer

A)  2.2 
B)  5.2 
C)  6.2 
D)  8.0 
A)  2.2 
B)  5.2 
C)  6.2 
D)  8.0

Question 13

The following information is taken from the financial statements of B.Darin Company:
   
Expenses include interest of $10,000 and income tax of $90,000.There was an average of 40,000 shares of common stock outstanding during the year and the market price of the stock is $15 per share at the end of the year.There was no preferred stock outstanding during the year.
Required:
Calculate the following ratios for the current year:
Part a.Fixed asset turnover
Part b.Return on equity (ROE)
Part c.Earnings per share (EPS)
Part d.Times interest earned
Part e.Price/Earnings ratio
Part f.Debt-to-assets ratio?Part g.Net profit margin

Accepted Answer

Part a
Average total assets = ($600,000

Question 14

Another term for historical cost is:

Accepted Answer

A)  entry price. 
B)  exit price. 
C)  fee price. 
D)  record price. 
A)  entry price. 
B)  exit price. 
C)  fee price. 
D)  record price.

Question 15

Assume the following sales data for a company:
 
By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

Accepted Answer

A)  40.0% and (10.7%) 
B)  28.6% and (12.0%) 
C)  40.0% and (15.0%) 
D)  32.0% and (10.7%) 
A)  40.0% and (10.7%) 
B)  28.6% and (12.0%) 
C)  40.0% and (15.0%) 
D)  32.0% and (10.7%)

Question 16

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

Accepted Answer

A)  Liquidity 
B)  Market share 
C)  Profitability 
D)  Solvency 
A)  Liquidity 
B)  Market share 
C)  Profitability 
D)  Solvency

Question 17

On a common size balance sheet what is the percentage that would be shown next to the dollar amount of current assets?

Accepted Answer

A)  100% 
B)  44% 
C)  30% 
D)  33% 
A)  100% 
B)  44% 
C)  30% 
D)  33%

Question 18

Net income was $418,600 in the current year and $364,000 in the prior year.The year-to-year percentage change in net income is closest to:

Accepted Answer

A)  15%. 
B)  55%. 
C)  87%. 
D)  13%. 
A)  15%. 
B)  55%. 
C)  87%. 
D)  13%.

Question 19

The general goal of horizontal analyses is to identify significant trends.

Accepted Answer

A) True 
 B)False

Question 20

The objectives of both IFRS and US GAAP objectives are to provide information that is:

Accepted Answer

A)  historical and conservative. 
B)  relevant and faithfully represented. 
C)  consistent and conservative. 
D)  reliable and historically based. 
A)  historical and conservative. 
B)  relevant and faithfully represented. 
C)  consistent and conservative. 
D)  reliable and historically based.

The going-concern assumption is also known as the continuity assumption.

Which of the following will not improve a company's gross profit percentage?

Which of the following could indicate bad news?

The primary objective of financial accounting and reporting is to provide:

Which of the following types of items would you be most likely to see below the income tax expense line on an income statement?

Which of the following ratios is used to evaluate solvency?

Which of the following is calculated by dividing net revenue by average net fixed assets?

Horizontal analysis:

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n):

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

The following information comes from the balance sheets and income statements of the Rocket Company: What is the times interest earned ratio for the current year?

Another term for historical cost is:

Assume the following sales data for a company: By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

On a common size balance sheet what is the percentage that would be shown next to the dollar amount of current assets?

Net income was $418,600 in the current year and $364,000 in the prior year.The year-to-year percentage change in net income is closest to:

The general goal of horizontal analyses is to identify significant trends.

The objectives of both IFRS and US GAAP objectives are to provide information that is:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

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Exam 13: Measuring and Evaluating Financial Performance

The going-concern assumption is also known as the continuity assumption.

Which of the following will not improve a company's gross profit percentage?

Which of the following could indicate bad news?

The primary objective of financial accounting and reporting is to provide:

Which of the following types of items would you be most likely to see below the income tax expense line on an income statement?

Which of the following ratios is used to evaluate solvency?

Which of the following is calculated by dividing net revenue by average net fixed assets?

Horizontal analysis:

If cost of goods sold remains unchanged,an increase in the inventory turnover ratio is indicative of a(n):

Judging only from the ratios below,which of the following clothing wholesalers is least likely to be having cash flow problems?

The following information comes from the balance sheets and income statements of the Rocket Company: What is the times interest earned ratio for the current year?

Another term for historical cost is:

Assume the following sales data for a company: By what percentage did sales differ between Years 1 and 2 and Years 2 and 3,respectively?

If an analyst wanted to assess a company's long-run survival,which of the following categories of ratios would most likely be used?

On a common size balance sheet what is the percentage that would be shown next to the dollar amount of current assets?

Net income was $418,600 in the current year and $364,000 in the prior year.The year-to-year percentage change in net income is closest to:

The general goal of horizontal analyses is to identify significant trends.

The objectives of both IFRS and US GAAP objectives are to provide information that is:

Business Decisions and Financial Accounting

Reporting Investing and Financing Results on the Balance Sheet

Reporting Operating Results on the Income Statement

Adjustments,financial Statements,and Financial Results

Fraud, Internal Control, and Cash

Internal Control and Financial Reporting for Cash and Merchandising Operations

Reporting and Interpreting Inventories and Cost of Goods Sold

Reporting and Interpreting Receivables,bad Debt Expense,and Interest Revenue

Reporting and Interpreting Long-Lived Tangible and Intangible Assets

Reporting and Interpreting Liabilities

Reporting and Interpreting Stockholders Equity

Reporting and Interpreting the Statement of Cash Flows

Filters