Question 1

Match each term to its best description or definition.
-Horizontal

Accepted Answer

A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data. 
A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data.

Question 2

Income tax expense in interim reporting should:

Accepted Answer

A) be based on the quarterly income only. 
B) contain a judgment estimation of the annual effective tax rate. 
C) be based on the income year-to-date. 
D) exclude extraordinary items in earlier quarters of the year. 
E) disregard year-end adjustments. 
A) be based on the quarterly income only. 
B) contain a judgment estimation of the annual effective tax rate. 
C) be based on the income year-to-date. 
D) exclude extraordinary items in earlier quarters of the year. 
E) disregard year-end adjustments.

Question 3

An interim period is a fiscal period less than one year.

Accepted Answer

A) True 
 B)False

Question 4

Interim reports are usually audited.

Accepted Answer

A) True 
 B)False

Question 5

The SEC requires interim financial data on Form 10-Q.

Accepted Answer

A) True 
 B)False

Question 6

Redeemable preferred stock is best considered as equity for ratio analysis.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following circumstances will cause sales to fixed assets to be abnormally high?

Accepted Answer

A) A recent purchase of land. 
B) A labor-intensive industry. 
C) A highly mechanized facility. 
D) High direct labor costs from a new union contract. 
E) The use of units-of-production depreciation. 
A) A recent purchase of land. 
B) A labor-intensive industry. 
C) A highly mechanized facility. 
D) High direct labor costs from a new union contract. 
E) The use of units-of-production depreciation.

Question 8

A reason that equity earnings create a problem in analyzing profitability is that equity earnings are:

Accepted Answer

A) usually greater than the related cash flow. 
B) less than dividends declared. 
C) more than dividends declared. 
D) extraordinary. 
E) nonrecurring. 
A) usually greater than the related cash flow. 
B) less than dividends declared. 
C) more than dividends declared. 
D) extraordinary. 
E) nonrecurring.

Question 9

Profitability is the ability of the firm to generate earnings.

Accepted Answer

A) True 
 B)False

Question 10

In the formula for return on investment,interest expense is multiplied by (1 - tax rate).Why is this adjustment made?

Accepted Answer

A) Interest is not tax deductible 
B) Debt is excluded from the denominator 
C) Net income in the formula is after tax 
D) Dividends are not deductible for tax purposes 
E) None of the answers are correct. 
A) Interest is not tax deductible 
B) Debt is excluded from the denominator 
C) Net income in the formula is after tax 
D) Dividends are not deductible for tax purposes 
E) None of the answers are correct.

Question 11

Which of the following would most likely cause a rise in net profit margin?

Accepted Answer

A) Increased sales 
B) Decreased preferred dividends 
C) Increased cost of sales 
D) Decreased operating expenses 
E) Decreased earnings per share 
A) Increased sales 
B) Decreased preferred dividends 
C) Increased cost of sales 
D) Decreased operating expenses 
E) Decreased earnings per share

Question 12

Which of the following expresses DuPont analysis?

Accepted Answer

A) Net profit margin = total asset turnover times return on assets 
B) Total asset turnover = operating asset turnover times financial leverage 
C) Return on assets = net profit margin times total asset turnover 
D) Return on investment = return on equity (1 - tax rate) 
E) Dividend yield = dividend payout times earnings per share 
A) Net profit margin = total asset turnover times return on assets 
B) Total asset turnover = operating asset turnover times financial leverage 
C) Return on assets = net profit margin times total asset turnover 
D) Return on investment = return on equity (1 - tax rate) 
E) Dividend yield = dividend payout times earnings per share

Question 13

Interim reports cover fiscal periods of less than one year.

Accepted Answer

A) True 
 B)False

Question 14

Return on investment will typically be lower than return on equity.

Accepted Answer

A) True 
 B)False

Question 15

Net profit margin measures return on:

Accepted Answer

A) sales. 
B) owners' equity. 
C) productive assets. 
D) total assets. 
E) inventory. 
A) sales. 
B) owners' equity. 
C) productive assets. 
D) total assets. 
E) inventory.

Question 16

DuPont analysis breaks return on assets into net profit margin and borrowing capacity.

Accepted Answer

A) True 
 B)False

Question 17

Match each term to its best description or definition.
-Trend analysis

Accepted Answer

A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data. 
A) Full or partial statements expressed in percentages of a given base. 
B) Requires full financial statements on a quarterly basis. 
C) All statement figures are expressed as a percentage of a base figure from that year's statement. 
D) A breakdown by major lines of business,only required in SEC reporting. 
E) A breakdown by major lines of business.
F)All statement figures are expressed as a percentage of base-year figures.
G)Requires estimation of some expense items.
H)A comparison of financial data over time.
I)Visual aids to understanding financial data.

Question 18

The use of debt with high interest charges may cause the net profit margin to be low.

Accepted Answer

A) True 
 B)False

Question 19

Match the ratio that goes with each formula.
-$\frac {\text { Net Sales }} { \text {Average net Fixed Assets} }$

Accepted Answer

A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin 
A) net profit margin 
B) total asset turnover 
C) return on assets 
D) DuPont return on assets 
E) operating income margin
F)operating asset turnover
G)return on operating assets
H)DuPont return on operating assets
I)sales to fixed assets
J)return on investment
K)return on total equity
L)return on common equity
M)gross profit margin

Question 20

Sales to fixed assets will have the least meaning if assets are relatively new.

Accepted Answer

A) True 
 B)False

Match each term to its best description or definition. -Horizontal

Income tax expense in interim reporting should:

An interim period is a fiscal period less than one year.

Interim reports are usually audited.

The SEC requires interim financial data on Form 10-Q.

Redeemable preferred stock is best considered as equity for ratio analysis.

Which of the following circumstances will cause sales to fixed assets to be abnormally high?

A reason that equity earnings create a problem in analyzing profitability is that equity earnings are:

Profitability is the ability of the firm to generate earnings.

In the formula for return on investment,interest expense is multiplied by (1 - tax rate).Why is this adjustment made?

Which of the following would most likely cause a rise in net profit margin?

Which of the following expresses DuPont analysis?

Interim reports cover fiscal periods of less than one year.

Return on investment will typically be lower than return on equity.

Net profit margin measures return on:

DuPont analysis breaks return on assets into net profit margin and borrowing capacity.

Match each term to its best description or definition. -Trend analysis

The use of debt with high interest charges may cause the net profit margin to be low.

Match the ratio that goes with each formula. - $\frac {\text { Net Sales }} { \text {Average net Fixed Assets} }$

Sales to fixed assets will have the least meaning if assets are relatively new.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Exam 8: Profitability

Match each term to its best description or definition. -Horizontal

Income tax expense in interim reporting should:

An interim period is a fiscal period less than one year.

Interim reports are usually audited.

The SEC requires interim financial data on Form 10-Q.

Redeemable preferred stock is best considered as equity for ratio analysis.

Which of the following circumstances will cause sales to fixed assets to be abnormally high?

A reason that equity earnings create a problem in analyzing profitability is that equity earnings are:

Profitability is the ability of the firm to generate earnings.

In the formula for return on investment,interest expense is multiplied by (1 - tax rate).Why is this adjustment made?

Which of the following would most likely cause a rise in net profit margin?

Which of the following expresses DuPont analysis?

Interim reports cover fiscal periods of less than one year.

Return on investment will typically be lower than return on equity.

Net profit margin measures return on:

DuPont analysis breaks return on assets into net profit margin and borrowing capacity.

Match each term to its best description or definition. -Trend analysis

The use of debt with high interest charges may cause the net profit margin to be low.

Match the ratio that goes with each formula. - Net Sales Average net Fixed Assets\frac {\text { Net Sales }} { \text {Average net Fixed Assets} }Average net Fixed Assets Net Sales ​

Sales to fixed assets will have the least meaning if assets are relatively new.

Introduction to Financial Reporting

Introduction to Financial Statements and Other Financial Reporting Topics

Balance Sheet

Income Statement

Basics of Analysis

Liquidity of Short-Term Assets;related Debt-Paying Ability

Long-Term Debt-Paying Ability

For the Investor

Statement of Cash Flows

Expanded Analysis

Special Industries: Banks, utilities, oil and Gas, transportation, insurance, real Estate Companies

Personal Financial Statements and Accounting for Governments and Not-For-Profit Organizations

Filters

Match the ratio that goes with each formula. - $\frac {\text { Net Sales }} { \text {Average net Fixed Assets} }$