Question 1

The dollar change for a financial statement item is calculated by:

Accepted Answer

A) Subtracting the analysis period amount from the base period amount. 
B) Subtracting the base period amount from the analysis period amount. 
C) Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D) Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E) Subtracting the base period amount from the analysis amount, then dividing the result by the base amount. 
A) Subtracting the analysis period amount from the base period amount. 
B) Subtracting the base period amount from the analysis period amount. 
C) Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D) Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E) Subtracting the base period amount from the analysis amount, then dividing the result by the base amount.

Question 2

Refer to the following selected financial information from Fennie's,LLC.Compute the company's working capital for Year 2.

Accepted Answer

A) $232,700. 
B) $220,600. 
C) $147,200. 
D) $111,700. 
E) $142,700. 
A) $232,700. 
B) $220,600. 
C) $147,200. 
D) $111,700. 
E) $142,700.

Question 3

Net income divided by average total assets is:

Accepted Answer

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

Question 4

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the following selected financial information from Hansen's,LLC.Compute the company's times interest earned for Year 2.

Accepted Answer

A) 6.9. 
B) 4.8. 
C) 5.8. 
D) 14.0. 
E) 7.9. 
A) 6.9. 
B) 4.8. 
C) 5.8. 
D) 14.0. 
E) 7.9.

Question 6

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

Accepted Answer

A) True 
 B)False

Question 7

Use the balance sheets of Sando shown below to calculate the following ratios for 2014 (round to the hundredths):
(a)Current ratio.
(b)Acid-test ratio.
(c)Debt ratio.
(d)Equity ratio.

Accepted Answer

The answer of Use the balance sheets of Sando shown...

Question 8

Identify and describe three common tools of financial statement analysis.

Accepted Answer

Analysis: Three common tools of financia

Question 9

Current assets minus current liabilities is:

Accepted Answer

A) Profit margin. 
B) Financial leverage. 
C) Current ratio. 
D) Working capital. 
E) Quick assets. 
A) Profit margin. 
B) Financial leverage. 
C) Current ratio. 
D) Working capital. 
E) Quick assets.

Question 10

A financial statement analysis report:

Accepted Answer

A) Enables readers to see the process and rationale of analysis. 
B) Forces preparers to organize their reasoning and to verify the logic of analysis. 
C) Serves as a method of communication to users. 
D) Helps users and preparers to refine conclusions based on evidence from key building blocks. 
E) A financial statement analysis report entails all of the choices listed. 
A) Enables readers to see the process and rationale of analysis. 
B) Forces preparers to organize their reasoning and to verify the logic of analysis. 
C) Serves as a method of communication to users. 
D) Helps users and preparers to refine conclusions based on evidence from key building blocks. 
E) A financial statement analysis report entails all of the choices listed.

Question 11

Net sales divided by average accounts receivable,net is the:

Accepted Answer

A) Days' sales uncollected. 
B) Average accounts receivable ratio. 
C) Current ratio. 
D) Profit margin. 
E) Accounts receivable turnover ratio. 
A) Days' sales uncollected. 
B) Average accounts receivable ratio. 
C) Current ratio. 
D) Profit margin. 
E) Accounts receivable turnover ratio.

Question 12

To compute trend percents the analyst should:

Accepted Answer

A) Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number. 
B) Subtract the analysis period number from the base period number. 
C) Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100. 
D) Compare amounts across industries using Dun and Bradstreet. 
E) Compare amounts to a competitor. 
A) Select a base period, assign each item in the base period statement a weight of 100%, and then express financial numbers from other periods as a percent of their base period number. 
B) Subtract the analysis period number from the base period number. 
C) Subtract the base period amount from the analysis period amount, divide the result by the analysis period amount, then multiply that amount by 100. 
D) Compare amounts across industries using Dun and Bradstreet. 
E) Compare amounts to a competitor.

Question 13

Earnings per share are calculated only on income from continuing operations.

Accepted Answer

A) True 
 B)False

Question 14

Use the financial data shown below to calculate the following ratios for the current year:
(a)Current ratio.
(b)Acid-test ratio.
(c)Accounts receivable turnover.
(d)Days' sales uncollected.
(e)Inventory turnover.
(f)Days' sales in inventory.
   Sales (all on credit)………………………………… $650,000
Cost of goods sold…………………………………. 425,000
Income before taxes……………………………….. 78,000
Net income………………………………………… 54,600

Accepted Answer

(a)Current ratio:
($19,500 + $65,000 + $

Question 15

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________________________.

Accepted Answer

The answer of The income level most likely to continue...

Question 16

Horizontal analysis:

Accepted Answer

A) Is a method used to evaluate changes in financial data across time. 
B) Is also called vertical analysis. 
C) Is the presentation of financial ratios. 
D) Is a tool used to evaluate financial statement items relative to industry statistics. 
E) Evaluates financial data across industries. 
A) Is a method used to evaluate changes in financial data across time. 
B) Is also called vertical analysis. 
C) Is the presentation of financial ratios. 
D) Is a tool used to evaluate financial statement items relative to industry statistics. 
E) Evaluates financial data across industries.

Question 17

Intra-company standards for financial statement analysis:

Accepted Answer

A) Are often based on a company's prior performance. 
B) Are often set by competitors. 
C) Are set by the company's industry. 
D) Are based on rules of thumb. 
E) Are published in Dun and Bradstreet. 
A) Are often based on a company's prior performance. 
B) Are often set by competitors. 
C) Are set by the company's industry. 
D) Are based on rules of thumb. 
E) Are published in Dun and Bradstreet.

Question 18

General-purpose financial statements include the (1)income statement,(2)balance sheet,(3)statement of stockholders' equity (or statement of retained earnings),(4)statement of cash flows,and (5)notes to these statements.

Accepted Answer

A) True 
 B)False

Question 19

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Accepted Answer

A) Asset comparative statements. 
B) Percentage comparative statements. 
C) Common-size comparative statements. 
D) Sales comparative statements. 
E) General-purpose financial statements. 
A) Asset comparative statements. 
B) Percentage comparative statements. 
C) Common-size comparative statements. 
D) Sales comparative statements. 
E) General-purpose financial statements.

Question 20

The standards for comparisons in financial statement analysis include (1)___________,(2)____________,(3)_____________,and (4)_______________.

Accepted Answer

intra-company; compe

Exam 17: Analysis of Financial Statements

The dollar change for a financial statement item is calculated by:

Refer to the following selected financial information from Fennie's,LLC.Compute the company's working capital for Year 2.

Net income divided by average total assets is:

The use of debt is sometimes described as financial leverage because debt can have the effect of increasing the return on equity.

Refer to the following selected financial information from Hansen's,LLC.Compute the company's times interest earned for Year 2.

Trend analysis is a form of horizontal analysis that can reveal patterns in data across successive periods.

Use the balance sheets of Sando shown below to calculate the following ratios for 2014 (round to the hundredths): (a)Current ratio. (b)Acid-test ratio. (c)Debt ratio. (d)Equity ratio.

Identify and describe three common tools of financial statement analysis.

Current assets minus current liabilities is:

A financial statement analysis report:

Net sales divided by average accounts receivable,net is the:

To compute trend percents the analyst should:

Earnings per share are calculated only on income from continuing operations.

The income level most likely to continue into the future and is commonly used in PE ratios and other market-based measures of performance is the ________________________.

Horizontal analysis:

Intra-company standards for financial statement analysis:

General-purpose financial statements include the (1)income statement,(2)balance sheet,(3)statement of stockholders' equity (or statement of retained earnings),(4)statement of cash flows,and (5)notes to these statements.

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

The standards for comparisons in financial statement analysis include (1)___________,(2)____________,(3)_____________,and (4)_______________.

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

Filters

The standards for comparisons in financial statement analysis include (1)_____,(2),(3)_,and (4)_________.