Question 1

Which of the following ratios is a comparison of a financial statement number to a market value number?

Accepted Answer

A)  Price-earnings ratio 
B)  Return on equity 
C)  Return on sales 
D)  Debt ratio 
A)  Price-earnings ratio 
B)  Return on equity 
C)  Return on sales 
D)  Debt ratio A

Question 2

Cheshire Company's financial statements reflect the following information:
  
Using this information, calculate the following ratios (round to two decimal places):

Accepted Answer

Using this informati

Question 3

When using common-size statements

Accepted Answer

A)  Data may be selected for the same business as of different dates, or for two or more businesses as of the same date 
B)  Relationships should be stated in terms of ratios 
C)  Dollar changes are reported over a period of at least three years 
D)  All of these are correct 
A)  Data may be selected for the same business as of different dates, or for two or more businesses as of the same date 
B)  Relationships should be stated in terms of ratios 
C)  Dollar changes are reported over a period of at least three years 
D)  All of these are correct A

Question 4

Which of the following ratios represents the proportion of borrowed funds used to acquire the company's assets?

Accepted Answer

A)  Return on assets 
B)  Return on sales 
C)  Debt ratio 
D)  Current ratio 
A)  Return on assets 
B)  Return on sales 
C)  Debt ratio 
D)  Current ratio

Question 5

Selected information for Isaac Company is as follows:
  
-Refer to Exhibit 14-1. Isaac's return on equity, rounded to the nearest percentage point, is

Accepted Answer

A)  20 percent. 
B)  21 percent. 
C)  28 percent. 
D)  40 percent. 
A)  20 percent. 
B)  21 percent. 
C)  28 percent. 
D)  40 percent.

Question 6

Which of the following ratios is calculated using only balance sheet numbers?

Accepted Answer

A)  Price earnings ratio 
B)  Return on sales 
C)  Asset turnover 
D)  Current ratio 
A)  Price earnings ratio 
B)  Return on sales 
C)  Asset turnover 
D)  Current ratio

Question 7

The following data came from the financial statements of the Cheviot Company:
 
- Refer to Exhibit 14-4. Compute the return on sales.

Accepted Answer

A)  25% 
B)  33% 
C)  40% 
D)  50% 
A)  25% 
B)  33% 
C)  40% 
D)  50%

Question 8

When analyzing a company's debt-to-equity ratio, if the ratio has a value that is greater then one, then the company has

Accepted Answer

A)  Less debt than equity 
B)  More debt than equity 
C)  Equal amounts of debt and equity 
D)  None of these are correct 
A)  Less debt than equity 
B)  More debt than equity 
C)  Equal amounts of debt and equity 
D)  None of these are correct

Question 9

Which of the following ratios is calculated using only income statement numbers?

Accepted Answer

A)  Debt ratio 
B)  Return on sales 
C)  Return on equity 
D)  Current ratio 
A)  Debt ratio 
B)  Return on sales 
C)  Return on equity 
D)  Current ratio

Question 10

The following data came from the financial statements of Petrini Company:
  
-Refer to Exhibit 14-6. Given the information above, compute the debt ratio (rounded to two decimal places) for Petrini Company.

Accepted Answer

A)  0.46 
B)  2.15 
C)  0.86 
D)  1.86 
A)  0.46 
B)  2.15 
C)  0.86 
D)  1.86

Question 11

Which of the following is NOT a situation when it would be important to analyze cash flow information because net income is NOT giving an accurate portrayal of the economic performance of the company?

Accepted Answer

A)  When a company is growing rapidly 
B)  When a company is striving to present a stellar financial record 
C)  When a company has a negative operating cash flow 
D)  When a company has several large noncash expenses 
A)  When a company is growing rapidly 
B)  When a company is striving to present a stellar financial record 
C)  When a company has a negative operating cash flow 
D)  When a company has several large noncash expenses

Question 12

Which of the following is NOT included in the DuPont framework?

Accepted Answer

A)  A measure of profitability 
B)  A measure of efficiency 
C)  A measure of market share 
D)  A measure of leverage 
A)  A measure of profitability 
B)  A measure of efficiency 
C)  A measure of market share 
D)  A measure of leverage

Question 13

The numbers below are for Jasper Company and Western Company:
  
Briefly explain exactly why Jasper's return on equity is lower than Western's.
Hint: Start your analysis by using the DuPont Framework.
   Jasper is less profitable at generating net income from each dollar of sales.
Jasper is less efficient at using assets to generate sales.

Accepted Answer

Briefly explain exactly why Jasper's ret

Question 14

Which of the following ratios is used to measure a firm's leverage?

Accepted Answer

A)  Debt ratio 
B)  Current ratio 
C)  Asset turnover 
D)  Return on equity 
A)  Debt ratio 
B)  Current ratio 
C)  Asset turnover 
D)  Return on equity

Question 15

Borrowing that allows a company to purchase more assets than its stockholders are able to pay for is

Accepted Answer

A)  Leverage 
B)  Profitability 
C)  Efficiency 
D)  Liquidity 
A)  Leverage 
B)  Profitability 
C)  Efficiency 
D)  Liquidity

Question 16

Selected financial statement numbers for Frederick Company are given below:
 
- Refer to Exhibit 14-5. Using the information above, calculate Frederick's inventory turnover (round to two decimal places).

Accepted Answer

A)  2.37 times 
B)  66.94 times 
C)  43.22 times 
D)  8.64 times 
A)  2.37 times 
B)  66.94 times 
C)  43.22 times 
D)  8.64 times

Question 17

In general, most companies have significant noncash expenses that reduce net income and also cause the cash flow-to-net income ratio to be

Accepted Answer

A)  Greater than 1 
B)  Equal to 1 
C)  Less than 1 
D)  None of these are correct 
A)  Greater than 1 
B)  Equal to 1 
C)  Less than 1 
D)  None of these are correct

Question 18

Which of the following ratios is used to measure a firm's efficiency at using its assets?

Accepted Answer

A)  Current ratio 
B)  Asset turnover 
C)  Return on sales 
D)  Return on equity 
A)  Current ratio 
B)  Asset turnover 
C)  Return on sales 
D)  Return on equity

Question 19

Which of the following ratios is used to measure a firm's leverage?

Accepted Answer

A)  Net income ¸ Equity 
B)  Sales ¸ Assets 
C)  Assets ¸ Equity 
D)  Net income ¸ Sales 
A)  Net income ¸ Equity 
B)  Sales ¸ Assets 
C)  Assets ¸ Equity 
D)  Net income ¸ Sales

Question 20

When analyzing a company's assets-to-equity ratio, if the ratio has a value that is equal to one, then the company has

Accepted Answer

A)  No debt 
B)  More debt than equity 
C)  Equal amounts of debt and equity 
D)  No stockholders' equity 
A)  No debt 
B)  More debt than equity 
C)  Equal amounts of debt and equity 
D)  No stockholders' equity

Exam 14: Analyzing Financial Statements

Which of the following ratios is a comparison of a financial statement number to a market value number?

Cheshire Company's financial statements reflect the following information: Using this information, calculate the following ratios (round to two decimal places):

When using common-size statements

Which of the following ratios represents the proportion of borrowed funds used to acquire the company's assets?

Selected information for Isaac Company is as follows: -Refer to Exhibit 14-1. Isaac's return on equity, rounded to the nearest percentage point, is

Which of the following ratios is calculated using only balance sheet numbers?

The following data came from the financial statements of the Cheviot Company: - Refer to Exhibit 14-4. Compute the return on sales.

When analyzing a company's debt-to-equity ratio, if the ratio has a value that is greater then one, then the company has

Which of the following ratios is calculated using only income statement numbers?

The following data came from the financial statements of Petrini Company: -Refer to Exhibit 14-6. Given the information above, compute the debt ratio (rounded to two decimal places) for Petrini Company.

Which of the following is NOT a situation when it would be important to analyze cash flow information because net income is NOT giving an accurate portrayal of the economic performance of the company?

Which of the following is NOT included in the DuPont framework?

Which of the following ratios is used to measure a firm's leverage?

Borrowing that allows a company to purchase more assets than its stockholders are able to pay for is

Selected financial statement numbers for Frederick Company are given below: - Refer to Exhibit 14-5. Using the information above, calculate Frederick's inventory turnover (round to two decimal places).

In general, most companies have significant noncash expenses that reduce net income and also cause the cash flow-to-net income ratio to be

Which of the following ratios is used to measure a firm's efficiency at using its assets?

Which of the following ratios is used to measure a firm's leverage?

When analyzing a company's assets-to-equity ratio, if the ratio has a value that is equal to one, then the company has

Accounting Information: Users and Uses

Financial Statements: An Overview

The Accounting Cycle: The Mechanics of Accounting

Completing the Accounting Cycle

Internal Controls: Ensuring the Integrity of Financial Information

Receivables: Selling a Product or a Service

Inventory and the Cost of Sales

Completing the Operating Cycle

Investments: Property, Plant, and Equipment and Intangible Assets

Financing: Long-Term Liabilities

Financing: Equity

Investments: Debt and Equity Securities

Statement of Cash Flows

Management Accounting and Cost Concepts

Cost Flows and Business Organizations

Activity-Based Costing

Budgeting and Control

Controlling Cost and Profit

Inventory Management and Variable and Absorption Costing

Cost Behavior and Decisions Using C-V-P Analysis

Relevant Information and Decisions

Capital Investment Decisions

New Measures of Performance

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