Question 1

Comparative financial statements are reports that show financial amounts placed side by side in columns on a single statement for analysis purposes.

Accepted Answer

A) True 
 B)False

Question 2

The ability to generate future revenues and meet long-term obligations is referred to as:

Accepted Answer

A) Liquidity and efficiency. 
B) Solvency. 
C) Profitability. 
D) Market prospects. 
E) Creditworthiness. 
A) Liquidity and efficiency. 
B) Solvency. 
C) Profitability. 
D) Market prospects. 
E) Creditworthiness.

Question 3

The average number of times a company's inventory is sold during an accounting period,calculated by dividing cost of goods sold by the average inventory balance,is the:

Accepted Answer

A) Accounts receivable turnover. 
B) Inventory turnover. 
C) Days' sales uncollected. 
D) Current ratio. 
E) Price earnings ratio. 
A) Accounts receivable turnover. 
B) Inventory turnover. 
C) Days' sales uncollected. 
D) Current ratio. 
E) Price earnings ratio.

Question 4

Explain the purpose of financial statement analysis for both external and internal users.

Accepted Answer

The purpose of financial statement analy

Question 5

The ability to generate positive market expectations is called:

Accepted Answer

A) Liquidity and efficiency. 
B) Liquidity and solvency. 
C) Profitability. 
D) Market prospects. 
E) Creditworthiness. 
A) Liquidity and efficiency. 
B) Liquidity and solvency. 
C) Profitability. 
D) Market prospects. 
E) Creditworthiness.

Question 6

A corporation reports the following year-end balance sheet data.Calculate the following ratios:
(a)working capital
(b)acid-test ratio
(c)current ratio
(d)debt ratio
(e)equity ratio
(f)debt-to-equity ratio
Cash……………………….. $ 40,000 Current liabilities $ 64,000
Accounts receivable………. 35,000 Long-term liabilities……….72,000
Inventory………………….. 60,000 Common stock……………..100,000
Equipment………………… 150,000 Retained earnings…………. 49,000
Total assets……………….. $285,000 Total liabilities and equity $285,000

Accepted Answer

The answer of A corporation reports the following year-end balance...

Question 7

The building blocks of financial statement analysis include:

Accepted Answer

A) Liquidity and efficiency. 
B) Solvency. 
C) Profitability. 
D) Market prospects. 
E) All of the choices are building blocks of financial statement analysis. 
A) Liquidity and efficiency. 
B) Solvency. 
C) Profitability. 
D) Market prospects. 
E) All of the choices are building blocks of financial statement analysis.

Question 8

Standards for comparisons in financial statement analysis include:

Accepted Answer

A) Intra-company standards. 
B) Competitors' standards. 
C) Industry standards. 
D) Guidelines (rules of thumb). 
E) All of the choices are standards for comparisons. 
A) Intra-company standards. 
B) Competitors' standards. 
C) Industry standards. 
D) Guidelines (rules of thumb). 
E) All of the choices are standards for comparisons.

Question 9

Net income divided by net sales is the:

Accepted Answer

A) Return on total assets. 
B) Profit margin. 
C) Current ratio. 
D) Total asset turnover. 
E) Days' sales in inventory. 
A) Return on total assets. 
B) Profit margin. 
C) Current ratio. 
D) Total asset turnover. 
E) Days' sales in inventory.

Question 10

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Accepted Answer

A) True 
 B)False

Question 11

Ratios,like other analysis tools,are only historically oriented.

Accepted Answer

A) True 
 B)False

Question 12

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals:

Accepted Answer

A) 1.16%. 
B) 2.14%. 
C) 4.67%. 
D) 5.41%. 
E) 18.50%. 
A) 1.16%. 
B) 2.14%. 
C) 4.67%. 
D) 5.41%. 
E) 18.50%.

Question 13

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

Accepted Answer

A) True 
 B)False

Question 14

Use the following selected information from Farris,LLC to determine the Year 2 and Year 1 trend percents for net sales using Year 1 as the base.

Accepted Answer

A) 36.4% for Year 2 and 41.1% for Year 1. 
B) 55.0% for Year 2 and 56.0% for Year 1. 
C) 119.4% for Year 2 and 100.0% for Year 1. 
D) 117.2% for Year 2 and 100.0% for Year 1. 
E) 65.1% for Year 2 and 64.6% for Year 1. 
A) 36.4% for Year 2 and 41.1% for Year 1. 
B) 55.0% for Year 2 and 56.0% for Year 1. 
C) 119.4% for Year 2 and 100.0% for Year 1. 
D) 117.2% for Year 2 and 100.0% for Year 1. 
E) 65.1% for Year 2 and 64.6% for Year 1.

Question 15

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals 21.4%.

Accepted Answer

A) True 
 B)False

Question 16

The following summaries from the income statements and balance sheets of Neeko,Inc.and Saxony,Inc.are presented below.
(1)For both companies for 2014,compute the:
(a)Current ratio
(b)Acid-test ratio
(c)Accounts receivable turnover
(d)Inventory turnover
(e)Days' sales in inventory
(f)Days' sales uncollected
Which company do you consider to be the better short-term credit risk?
 Explain.
(2)For both companies for 2014,compute the:
(a)Profit margin ratio
(b)Return on total assets
(c)Return on common stockholders' equity
Which company do you consider to have better profitability ratios?

Accepted Answer

@#IMG-DLM& Saxony has higher current ratios and ac

Question 17

One of several ratios that reflects solvency includes the:

Accepted Answer

A) Acid-test ratio. 
B) Current ratio. 
C) Times interest earned ratio. 
D) Total asset turnover. 
E) Days' sales in inventory. 
A) Acid-test ratio. 
B) Current ratio. 
C) Times interest earned ratio. 
D) Total asset turnover. 
E) Days' sales in inventory.

Question 18

The measurement of key relations among financial statement items is known as:

Accepted Answer

A) Financial reporting. 
B) Horizontal analysis. 
C) Investment analysis. 
D) Ratio analysis. 
E) Risk analysis. 
A) Financial reporting. 
B) Horizontal analysis. 
C) Investment analysis. 
D) Ratio analysis. 
E) Risk analysis.

Question 19

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

A) True 
 B)False

Question 20

The comparison of a company's financial condition and performance across time is known as:

Accepted Answer

A) Horizontal analysis. 
B) Vertical analysis. 
C) Political analysis. 
D) Financial reporting. 
E) Investment analysis. 
A) Horizontal analysis. 
B) Vertical analysis. 
C) Political analysis. 
D) Financial reporting. 
E) Investment analysis.

Exam 17: Analysis of Financial Statements

Comparative financial statements are reports that show financial amounts placed side by side in columns on a single statement for analysis purposes.

The ability to generate future revenues and meet long-term obligations is referred to as:

The average number of times a company's inventory is sold during an accounting period,calculated by dividing cost of goods sold by the average inventory balance,is the:

Explain the purpose of financial statement analysis for both external and internal users.

The ability to generate positive market expectations is called:

The building blocks of financial statement analysis include:

Standards for comparisons in financial statement analysis include:

Net income divided by net sales is the:

A company's board of directors analyzes financial statements to assess future company prospects for making operating decisions.

Ratios,like other analysis tools,are only historically oriented.

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals:

A company with a high inventory turnover requires a smaller investment in inventory than one producing the same sales with a lower turnover.

Use the following selected information from Farris,LLC to determine the Year 2 and Year 1 trend percents for net sales using Year 1 as the base.

A company reports basic earnings per share of $3.50,cash dividends per share of $0.75,and a market price per share of $64.75.The company's dividend yield equals 21.4%.

One of several ratios that reflects solvency includes the:

The measurement of key relations among financial statement items is known as:

Profitability is the ability to generate future revenues and meet long-term obligations.

The comparison of a company's financial condition and performance across time is known as:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

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