Question 1

Which ratio would you use to examine a company's ability to pay its debts in the short term?

Accepted Answer

A)  Earnings per share 
B)  Acid-test ratio 
C)  Debt to assets ratio 
D)  Return on equity 
A)  Earnings per share 
B)  Acid-test ratio 
C)  Debt to assets ratio 
D)  Return on equity

Question 2

Indicate whether each of the following statements about financial statement analysis is

Accepted Answer

Both dividends and earnings performance

Question 3

Assume that you are considering purchasing some of a company's long-term bonds as an investment.Which of the company's financial statement ratios would you probably be most interested in?

Accepted Answer

A)  Debt to assets ratio 
B)  Debt to equity 
C)  Plant assets to long-term liabilities 
D)  All of these answers are correct. 
A)  Debt to assets ratio 
B)  Debt to equity 
C)  Plant assets to long-term liabilities 
D)  All of these answers are correct.

Question 4

The accounting profession assumes that financial statement users have an expert knowledge of business.

Accepted Answer

A) True 
 B)False

Question 5

The following information applies to Acorn Cons

Accepted Answer

None

Question 6

Which type of approach should be used when evaluating corporate results using horizontal analysis?

Accepted Answer

A)  Study of absolute amounts. 
B)  Percentages. 
C)  Trends. 
D)  All of these answers are correct. 
A)  Study of absolute amounts. 
B)  Percentages. 
C)  Trends. 
D)  All of these answers are correct.

Question 7

Comparative income statements for Pearle Company are provided below: $\begin{array}{lll}
\hline  \quad \quad \quad \quad \quad \quad \quad \quad \text {Pearle Company }\
\hline  \quad \quad \quad \quad \text { Comparative Income Statement }\
\hline  \quad \quad \quad \quad \quad \text {Years Ended December 31 ,}\
\begin{array}{|l|l|l|}
\hline  & 2014&2013\
\hline \text { Sales } & \$ 595,000&532,200  \
\hline \text { Less cost of goods sold } & \underline { 386,200 } & \underline {  357,650   }  \
\hline \text { Gross margin } &208,800&174,550 \
\hline \text { Less operating expenses } & \underline {   108,950   } & \underline { 99,770     }  \
\hline \text { Income before taxes } & 99,850 & 74,780 \
\hline \text { Income taxes } & \underline {  39,940   } & \underline {29,912 }  \
\hline \text { Net income } & \underline { \$59,910    } & \underline {  \$ 44,868    }  \
\hline
\end{array}
\end{array}$ Required:
Perform a horizontal analysis of Pearle Company's income statement by computing horizontal percentages for each item.Round your answer to one decimal place (i.e.22.5%).

Accepted Answer

None

Question 8

Which ratio measures how effectively a company is using assets to generate revenue?

Accepted Answer

A)  Net margin 
B)  Plant assets to long-term liabilities 
C)  Asset turnover 
D)  Inventory turnover 
A)  Net margin 
B)  Plant assets to long-term liabilities 
C)  Asset turnover 
D)  Inventory turnover

Question 9

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

Accepted Answer

A) True 
 B)False

Question 10

Two ratios that provide insight on the relationship between credit sales and receivables are:

Accepted Answer

A)  Current ratio and inventory turnover ratio. 
B)  Accounts receivable turnover and average days to collect receivables. 
C)  Average days to collect receivables and asset turnover. 
D)  Accounts receivable turnover and current ratio. 
A)  Current ratio and inventory turnover ratio. 
B)  Accounts receivable turnover and average days to collect receivables. 
C)  Average days to collect receivables and asset turnover. 
D)  Accounts receivable turnover and current ratio.

Question 11

Indicate whether each of the following statements about financial statement analysis is

Accepted Answer

Meaningful comparisons between two compa

Question 12

Indicate whether each of the following statements is

Accepted Answer

Some forms of financial statement analys

Question 13

The Martin Company reported net income of $15,000 on gross sales of $80,000.The company has average total assets of $135,000,of which $102,000 is property,plant and equipment.What is the company's return on investment (rounded to the nearest decimal point)?

Accepted Answer

A)  18.8% 
B)  11.1% 
C)  14.7% 
D)  12.5% 
A)  18.8% 
B)  11.1% 
C)  14.7% 
D)  12.5%

Question 14

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

Accepted Answer

A)  10.0% 
B)  16.7% 
C)  12.5% 
D)  50.0% 
A)  10.0% 
B)  16.7% 
C)  12.5% 
D)  50.0%

Question 15

The following information is from the financial records of Newton Company for Year 2: $\begin{array}{|l|r|}
\hline \text { Sales } & \$ 620,000 \
\hline \text { Interest expense } & 26,000 \
\hline \text { Income tax expense } & 46,000 \
\hline \text { Net income } & 104,000 \
\hline
\end{array}$ Required:
Calculate the number of times interest is earned for Newton in Year 2.Round your answer to one decimal place.

Accepted Answer

Number of times interest is earned = Ear

Question 16

Vertical analysis always involves comparing financial statement elements over a span of time.

Accepted Answer

A) True 
 B)False

Question 17

Indicate whether each of the following statements about financial statement analysis is

Accepted Answer

The ratio,plant assets to long-term liab

Question 18

Various ratios are computed to assess different aspects of a company's financial condition and (or)strength.
Required:
In the table below,indicate which aspect of financial condition each specified ratio is designed to assess: \(\begin{array}{|l|l|l|l|l|l|}
\hline & & &&& \text { Stock } \
\hline &\text { Ratio }& \text { Liquidity } & \text { Solvency } & \text { Profitability } & \text { Market } \
\hline \text { 1. } & \text { Accounts receivable tumover } \
\hline \text { 2. } & \text { Average days to collect receivables } \
\hline 3 . & \text { Book value per share } \
\hline \text { 4. } & \text { Current ratio } \
\hline \text { 5. } & \text { Debt to equity ratio } \
\hline 6 . & \text { Dividend yield } \
\hline 7 . & \text { Earnings per share } \
\hline \text { 8. } & \text { Inventory turnover } \
\hline \text { 9. } & \text { Net margin } \
\hline \text { 10. } & \text { Average days to sell inventory } \
\hline \text { 11. } & \text { Number of times interest is earned } \
\hline \text { 12. } & \text { Plant assets to long-term liabilities } \
\hline \text { 13. } & \text { Price-eamings ratio } \
\hline \text { 14. } & \text { Quick ratio } \
\hline \text { 15. } & \text { Return on equity } \
\hline \text { 16. } & \text { Return on investment } \
\hline \text { 17. } & \text { Debt to assets ratio } \
\hline \text { 18. } & \text { Asset turnover ratio } \
\hline \text { 19. } & \text { Working capital } \
\hline
\end{array}\)

Accepted Answer

Wording for 2,5 and 10 are different fro

Question 19

The most frequently quoted measure of earnings performance is the stockholders' equity ratio.

Accepted Answer

A) True 
 B)False

Question 20

While horizontal analysis examines one item over many time periods,vertical analysis examines many items in the same interval of time.

Accepted Answer

A) True 
 B)False

Which ratio would you use to examine a company's ability to pay its debts in the short term?

Indicate whether each of the following statements about financial statement analysis is

Assume that you are considering purchasing some of a company's long-term bonds as an investment.Which of the company's financial statement ratios would you probably be most interested in?

The accounting profession assumes that financial statement users have an expert knowledge of business.

The following information applies to Acorn Cons

Which type of approach should be used when evaluating corporate results using horizontal analysis?

Which ratio measures how effectively a company is using assets to generate revenue?

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

Two ratios that provide insight on the relationship between credit sales and receivables are:

Indicate whether each of the following statements about financial statement analysis is

Indicate whether each of the following statements is

The Martin Company reported net income of $15,000 on gross sales of $80,000.The company has average total assets of $135,000,of which $102,000 is property,plant and equipment.What is the company's return on investment (rounded to the nearest decimal point)?

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

The following information is from the financial records of Newton Company for Year 2: Sales \ 620,000 Interest expense 26,000 Income tax expense 46,000 Net income 104,000 Required: Calculate the number of times interest is earned for Newton in Year 2.Round your answer to one decimal place.

Vertical analysis always involves comparing financial statement elements over a span of time.

Indicate whether each of the following statements about financial statement analysis is

The most frequently quoted measure of earnings performance is the stockholders' equity ratio.

While horizontal analysis examines one item over many time periods,vertical analysis examines many items in the same interval of time.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

Which ratio would you use to examine a company's ability to pay its debts in the short term?

Indicate whether each of the following statements about financial statement analysis is

Assume that you are considering purchasing some of a company's long-term bonds as an investment.Which of the company's financial statement ratios would you probably be most interested in?

The accounting profession assumes that financial statement users have an expert knowledge of business.

The following information applies to Acorn Cons

Which type of approach should be used when evaluating corporate results using horizontal analysis?

Which ratio measures how effectively a company is using assets to generate revenue?

A vertical analysis uses percentages to compare each of the parts of an individual statement to a key statement figure.For example,on an income statement each item would be shown as a percentage of net sales.

Two ratios that provide insight on the relationship between credit sales and receivables are:

Indicate whether each of the following statements about financial statement analysis is

Indicate whether each of the following statements is

The Martin Company reported net income of $15,000 on gross sales of $80,000.The company has average total assets of $135,000,of which $102,000 is property,plant and equipment.What is the company's return on investment (rounded to the nearest decimal point)?

The Dennis Company reported net income of $50,000 on sales of $300,000.The company has average total assets of $500,000 and average total liabilities of $100,000.What is the company's return on equity ratio?

The following information is from the financial records of Newton Company for Year 2: Sales \ 620,000 Interest expense 26,000 Income tax expense 46,000 Net income 104,000 Required: Calculate the number of times interest is earned for Newton in Year 2.Round your answer to one decimal place.

Vertical analysis always involves comparing financial statement elements over a span of time.

Indicate whether each of the following statements about financial statement analysis is

The most frequently quoted measure of earnings performance is the stockholders' equity ratio.

While horizontal analysis examines one item over many time periods,vertical analysis examines many items in the same interval of time.

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Planning for Profit and Cost Control

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Statement of Cash Flows

Filters