Question 1

To analyze changes in a company's sales over the last five years,you should perform:

Accepted Answer

A)  vertical analysis. 
B)  ratio analysis. 
C)  horizontal analysis. 
D)  cross-sectional analysis. 
A)  vertical analysis. 
B)  ratio analysis. 
C)  horizontal analysis. 
D)  cross-sectional analysis.

Question 2

Gains or losses from discontinued operations are reported on a separate line on the income statement net of income tax effects.

Accepted Answer

A) True 
 B)False

Question 3

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

Accepted Answer

A)  Puffin generated more sales per dollar of fixed assets. 
B)  Puffin has greater depreciation expense. 
C)  Puffin has more fixed assets. 
D)  Puffin has greater sales. 
A)  Puffin generated more sales per dollar of fixed assets. 
B)  Puffin has greater depreciation expense. 
C)  Puffin has more fixed assets. 
D)  Puffin has greater sales.

Question 4

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

Accepted Answer

A)  The number of stores has expanded. 
B)  Cost of Goods sold has been increasing. 
C)  Employee wages have been increasing. 
D)  The company has closed some of its stores. 
A)  The number of stores has expanded. 
B)  Cost of Goods sold has been increasing. 
C)  Employee wages have been increasing. 
D)  The company has closed some of its stores.

Question 5

The income statements for Urban Outfits,Inc.are presented below:
   
Required:
Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent.
Part b.Interpret your analysis.Comment on significant changes.

Accepted Answer

Part a
 @#IMG-DLM& 
Part b
Sales increased by 7% b

Question 6

Vertical analysis is the comparison of a company's financial information over time.

Accepted Answer

A) True 
 B)False

Question 7

The debt-to-assets ratio is the:

Accepted Answer

A)  ratio of current liabilities to current assets. 
B)  ratio of long term liabilities to fixed assets. 
C)  ratio of total liabilities to total assets. 
D)  proportion of short-term liabilities to total liabilities. 
A)  ratio of current liabilities to current assets. 
B)  ratio of long term liabilities to fixed assets. 
C)  ratio of total liabilities to total assets. 
D)  proportion of short-term liabilities to total liabilities.

Question 8

Which of the following measures would assist in assessing the solvency of a company?

Accepted Answer

A)  Debt-to-assets 
B)  Fixed asset turnover 
C)  Return on equity 
D)  Current ratio 
A)  Debt-to-assets 
B)  Fixed asset turnover 
C)  Return on equity 
D)  Current ratio

Question 9

Horizontal analysis involves:

Accepted Answer

A)  Comparing individual financial statement line items with each other to understand the relationships between line items. 
B)  Comparing individual financial statement line items to some benchmark, typically similar competitors' financial statement line items. 
C)  Comparing individual financial statement line items over time. 
D)  Comparing individual financial statement line items that have been arranged horizontally from highest to lowest dollar amounts. 
A)  Comparing individual financial statement line items with each other to understand the relationships between line items. 
B)  Comparing individual financial statement line items to some benchmark, typically similar competitors' financial statement line items. 
C)  Comparing individual financial statement line items over time. 
D)  Comparing individual financial statement line items that have been arranged horizontally from highest to lowest dollar amounts.

Question 10

Husain,Inc.'s income statement and other financial information for the current year is presented below.
   
Required:
Part a.Perform vertical analysis of the income statement.(Round to the nearest whole percentage.)
Part b.Calculate the debt-to-assets ratio.(Round to two decimal places.)
Part c.Calculate the times interest earned ratio.(Round to two decimal places.)
Part d.Evaluate the company's solvency.

Accepted Answer

Part a
 @#IMG-DLM& 
Part b
Debt to Assets = Total

Question 11

The following information is taken from the financial statements of a company for the current year:
  
-Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

Accepted Answer

A)  76% 
B)  24% 
C)  31% 
D)  18% 
A)  76% 
B)  24% 
C)  31% 
D)  18%

Question 12

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Accepted Answer

A)  Anheuser Busch's net profit margin. 
B)  the Fortune 500's net profit margin. 
C)  Pepsico's net profit margin. 
D)  the average net profit margin for the soft drink manufacturing industry. 
A)  Anheuser Busch's net profit margin. 
B)  the Fortune 500's net profit margin. 
C)  Pepsico's net profit margin. 
D)  the average net profit margin for the soft drink manufacturing industry.

Question 13

Which of the following is calculated by dividing (net income less preferred dividends)by average common stockholders' equity?

Accepted Answer

A)  Return on assets ratio 
B)  Return on equity ratio 
C)  Earnings per share 
D)  Net profit margin ratio 
A)  Return on assets ratio 
B)  Return on equity ratio 
C)  Earnings per share 
D)  Net profit margin ratio

Question 14

Which of the following ratios is used to evaluate solvency?

Accepted Answer

A)  Earnings per share (EPS) 
B)  Fixed asset turnover 
C)  Debt-to-assets 
D)  Current ratio 
A)  Earnings per share (EPS) 
B)  Fixed asset turnover 
C)  Debt-to-assets 
D)  Current ratio

Question 15

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

Accepted Answer

A)  previous period amount from the current amount. 
B)  current period amount from the previous period amount. 
C)  current period amount from the previous period amount and then dividing the result by the previous period amount. 
D)  previous period amount from the current period amount and then dividing the result by the current period amount. 
A)  previous period amount from the current amount. 
B)  current period amount from the previous period amount. 
C)  current period amount from the previous period amount and then dividing the result by the previous period amount. 
D)  previous period amount from the current period amount and then dividing the result by the current period amount.

Question 16

The going-concern assumption states that the:

Accepted Answer

A)  company will always maximize the profit for stockholders. 
B)  company is not expected to go out of business in the near future. 
C)  company is a separate concern from the stockholders. 
D)  company's results will be reported in a consistent manner from period to period. 
A)  company will always maximize the profit for stockholders. 
B)  company is not expected to go out of business in the near future. 
C)  company is a separate concern from the stockholders. 
D)  company's results will be reported in a consistent manner from period to period.

Question 17

A current ratio of 2.5 means that for every dollar of:

Accepted Answer

A)  accounts payable, there is $2.50 of cash. 
B)  current liabilities, there is $2.50 of current assets. 
C)  current assets, there is $2.50 of current liabilities. 
D)  total liabilities, there is $2.50 of cash. 
A)  accounts payable, there is $2.50 of cash. 
B)  current liabilities, there is $2.50 of current assets. 
C)  current assets, there is $2.50 of current liabilities. 
D)  total liabilities, there is $2.50 of cash.

Question 18

Which of the following is not a similarity of GAAP and IFRS?

Accepted Answer

A)  They both generally require that an exchange take place before a transaction is recorded. 
B)  They both promote information that is relevant and that faithfully represents the underlying transactions. 
C)  They both include rules about recognition, classification, and measurement of transactions. 
D)  They both allow fixed assets to be reported at fair values. 
A)  They both generally require that an exchange take place before a transaction is recorded. 
B)  They both promote information that is relevant and that faithfully represents the underlying transactions. 
C)  They both include rules about recognition, classification, and measurement of transactions. 
D)  They both allow fixed assets to be reported at fair values.

Question 19

Which income statement line item had the largest percentage increase from the prior year to the current year?

Accepted Answer

A)  Depreciation Expense 
B)  Cost of Goods Sold 
C)  Interest Expense 
D)  Sales 
A)  Depreciation Expense 
B)  Cost of Goods Sold 
C)  Interest Expense 
D)  Sales

Question 20

A current ratio of less than one is not so much of a concern when the company has a:

Accepted Answer

A)  low fixed asset turnover ratio. 
B)  high days to collect number. 
C)  high inventory turnover ratio. 
D)  high debt-to-equity ratio. 
A)  low fixed asset turnover ratio. 
B)  high days to collect number. 
C)  high inventory turnover ratio. 
D)  high debt-to-equity ratio.

To analyze changes in a company's sales over the last five years,you should perform:

Gains or losses from discontinued operations are reported on a separate line on the income statement net of income tax effects.

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

The income statements for Urban Outfits,Inc.are presented below: Required: Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. Part b.Interpret your analysis.Comment on significant changes.

Vertical analysis is the comparison of a company's financial information over time.

The debt-to-assets ratio is the:

Which of the following measures would assist in assessing the solvency of a company?

Horizontal analysis involves:

The following information is taken from the financial statements of a company for the current year: -Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Which of the following is calculated by dividing (net income less preferred dividends)by average common stockholders' equity?

Which of the following ratios is used to evaluate solvency?

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

The going-concern assumption states that the:

A current ratio of 2.5 means that for every dollar of:

Which of the following is not a similarity of GAAP and IFRS?

Which income statement line item had the largest percentage increase from the prior year to the current year?

A current ratio of less than one is not so much of a concern when the company has a:

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

To analyze changes in a company's sales over the last five years,you should perform:

Gains or losses from discontinued operations are reported on a separate line on the income statement net of income tax effects.

Puffin Turnovers,Inc.'s fixed asset turnover was 0.9 while Muffin Tops,Inc.'s fixed asset turnover was 0.6.Which of the following statements about Puffin compared with Muffin is correct?

If net sales revenue for a retail chain has been relatively constant for the last four years,but the fixed asset turnover has been decreasing,what would be the most likely cause?

The income statements for Urban Outfits,Inc.are presented below: Required: Part a.Prepare a horizontal analysis of the income statement above.Round to the nearest whole percent. Part b.Interpret your analysis.Comment on significant changes.

Vertical analysis is the comparison of a company's financial information over time.

The debt-to-assets ratio is the:

Which of the following measures would assist in assessing the solvency of a company?

Horizontal analysis involves:

The following information is taken from the financial statements of a company for the current year: -Use the information above to answer the following question.On a common size income statement for this year,what is the percentage that would be shown next to the dollar amount of cost of goods sold?

When evaluating its net profit margin for the current year,Coca Cola would most likely use all of the following benchmarks except:

Which of the following is calculated by dividing (net income less preferred dividends)by average common stockholders' equity?

Which of the following ratios is used to evaluate solvency?

A trend analysis to determine a year-to-year dollar amount change is calculated by subtracting the:

The going-concern assumption states that the:

A current ratio of 2.5 means that for every dollar of:

Which of the following is not a similarity of GAAP and IFRS?

Which income statement line item had the largest percentage increase from the prior year to the current year?

A current ratio of less than one is not so much of a concern when the company has a:

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