Question 1

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 2

Refer to the following selected financial information from McCormik, LLC. Compute the company's working capital for Year 2. $$\begin{array} { | l | r | r | } 
\hline & \text { Year 2 } & { \text { Year 1 } } \
\hline \text { Cash } & \$ 37,500 & 36,850 \
\hline \text { Short-term investments } & 90,000 & 90,000 \
\hline \text { Accounts receivable, net } & 85,500 & 86,250 \
\hline \text { Merchandise inventory } & 121,000 & 117,000 \
\hline \text { Prepaid expenses } & 12,100 & 13,500 \
\hline \text { Plant assets } & 388,000 & 392,000 \
\text { Accounts payable } & 113,400 & 111.750 \
\hline \text { Net sales } & 711,000 & 706,00 \
\hline \text { Cost of goods sold } & 390,000 & 385,500 \
\hline
\end{array}$$

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

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:

Accepted Answer

A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements. 
A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements.

Question 4

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Accepted Answer

A) True 
 B)False

Question 5

A corporation reports the following year-end balance sheet data. The company's debt-to-equity ratio equals: $$\begin{array} { | l | r |r| r | } 
\hline \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 75,000 \
\hline \text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\hline \text { nnventory } & 60,000 & \text { Common stock } & 100,000 \
\hline \text { Equipment } & \underline { 145,000 } & \text { Retained earnings } & \underline { 90,000 } \
\hline\text { Total assets } & \underline{\$ 300,000 }& \text { Total liabilities and equity } &\underline{ \$ 300,000 }\
\hline
\end{array}$$

Accepted Answer

A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63 
A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63

Question 6

Liquidity refers to the availability of resources to meet short-term cash requirements.

Accepted Answer

A) True 
 B)False

Question 7

What are the four standards for comparisons in financial analysis? Give an example of each.

Accepted Answer

The standards are intra-company comparis

Question 8

For the following financial statement items, calculate trend percentages using 2016 as the base year:
 $\begin{array}{|l|r|r|r|r|r|r|} 
\hline &{2020} & {2019} & {2018} & {2017} & {2016} \
\hline \text { Sales.............. } & \$ 1,195,400 & \$ 1,118,000 & \$ 1,049,000 & \$ 963,200 & \$ 860,000 \
\hline \text { Cost of sales........... } & 752,400 & 704,000 & 671,000 & 616,700 & 559,000 \
\hline \text { Gross profit........... } & \$ 443,000 & \$ 414,000 & \$ 378,000 & \$ 346,500 & \$ 301,000\
\hline
\end{array}$

Accepted Answer

None

Question 9

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 10

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.

Question 11

The dollar change for a comparative 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 12

All of the following statements regarding a business segment are true except:

Accepted Answer

A)  A business segment is a part of a company's operations that serves a particular product line. 
B)  A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company. 
C)  A company's gain or loss from selling or closing down a segment is reported separately. 
D)  The income tax effects of a discontinued segment are combined with income tax from continuing operations. 
E)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately. 
A)  A business segment is a part of a company's operations that serves a particular product line. 
B)  A segment has assets, liabilities, and financial results of operations that can be distinguished from those of other parts of the company. 
C)  A company's gain or loss from selling or closing down a segment is reported separately. 
D)  The income tax effects of a discontinued segment are combined with income tax from continuing operations. 
E)  A segment's income for the period prior to the disposal and the gain or loss resulting from disposing of the segment's assets are reported separately.

Question 13

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

Accepted Answer

A) True 
 B)False

Current assets minus current liabilities is:

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Liquidity refers to the availability of resources to meet short-term cash requirements.

What are the four standards for comparisons in financial analysis? Give an example of each.

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

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

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

All of the following statements regarding a business segment are true except:

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

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Exam 13: Analysis of Financial Statements

Current assets minus current liabilities is:

Financial statements with data for two or more successive accounting periods placed in columns side by side, sometimes with changes shown in both dollar amounts and percentages, are referred to as:

A good financial report does not link interpretations and conclusions of analysis with the underlying information.

Liquidity refers to the availability of resources to meet short-term cash requirements.

What are the four standards for comparisons in financial analysis? Give an example of each.

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

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

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

All of the following statements regarding a business segment are true except:

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa), a meaningful percent change cannot be calculated.

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Time Value of Money

Analyzing for Business Transactions

Partnership Accounting

Filters