Question 1

Peterson Company has current liabilities of $210,000 and working capital of $56,000. Its current assets, therefore, must equal $266,000.

Accepted Answer

A) True 
 B)False

Question 2

Vertical analysis of income statement data most often involves a comparison of each income statement item with:

Accepted Answer

A) net sales. 
B) gross profit on sales. 
C) net income before taxes. 
D) net income after taxes. 
A) net sales. 
B) gross profit on sales. 
C) net income before taxes. 
D) net income after taxes.

Question 3

A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with:

Accepted Answer

A) the amount for the same balance sheet item on a previous date. 
B) the net sales from the income statement for the period ending on that date. 
C) the total stockholders' equity on the balance sheet for that date. 
D) the total of the assets on the balance sheet for that date. 
A) the amount for the same balance sheet item on a previous date. 
B) the net sales from the income statement for the period ending on that date. 
C) the total stockholders' equity on the balance sheet for that date. 
D) the total of the assets on the balance sheet for that date.

Question 4

Quick assets include cash, receivables, and inventories.

Accepted Answer

A) True 
 B)False

Question 5

Use the following information for the questions.
 
-Using the information shown, prepare a vertical analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place. (Leave all percentages unadjusted.)

Accepted Answer

The answer of Use the following information for the questions.
...

Question 6

Use the following information .
Quotidian Industries Income Statement
For the Year Ended June 30, 2020 & 2019
   Liabilities and Stockholders' Equity
   Long-Term Liabilities
  
-Using the information given, analyze the financial strength of Quotidian Industries for 2020.

Accepted Answer

Number of times bond interest earned 31.

Question 7

On a comparative income statement, gross revenues were $310,000, sales returns and allowances were $14,000 and sales discounts amounted to $2,200. Selling expenses of $54,000 were incurred during the year. The vertical analysis would show current year selling expenses as 18.4%.

Accepted Answer

A) True 
 B)False

Question 8

The rate of return on net sales is a basic measure of operating efficiency and------------

Accepted Answer

The answer of The rate of return on net sales...

Question 9

Using the comparative balance sheet given below, prepare a vertical analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place. (Leave all vertical analysis percentages unadjusted. )

Accepted Answer

1. 13.4; 17.7; 2. 32.5; 31.9;

Question 10

A company reported net income of $96,000. It paid a cash dividend of $32,000 to preferred stockholders. If the company has 16,000 shares of common stock outstanding, earnings per share is----------- .

Accepted Answer

The answer of A company reported net income of $96,000....

Question 11

The current ratio measures a company's ability to pay its current debts using current assets.

Accepted Answer

A) True 
 B)False

Question 12

If the cost of goods sold is 65 percent of net sales, gross profit on sales would be----------- percent of net sales.

Accepted Answer

The answer of If the cost of goods sold is...

Question 13

A company had income of $136,000 in 2019 and $210,000 in 2020. The increase in net income from 2019 to 2020 is:

Accepted Answer

A) 64.8 percent. 
B) 35.2 percent. 
C) 25 percent. 
D) 54.4 percent. 
A) 64.8 percent. 
B) 35.2 percent. 
C) 25 percent. 
D) 54.4 percent.

Question 14

Which of the following is true of horizontal analysis?

Accepted Answer

A) The percentages of change can be added or subtracted from top to bottom. 
B) The current year is always the base year. 
C) The amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point. 
D) The amounts and percentages of increase or decrease can be added and subtracted vertically in a column. 
A) The percentages of change can be added or subtracted from top to bottom. 
B) The current year is always the base year. 
C) The amounts of increase or decrease can be added or subtracted in the column from top to bottom and will give correct subtotals at each point. 
D) The amounts and percentages of increase or decrease can be added and subtracted vertically in a column.

Question 15

If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2019 to 2020, the firm used:

Accepted Answer

A) horizontal analysis. 
B) vertical analysis. 
C) common-size analysis. 
D) trend analysis. 
A) horizontal analysis. 
B) vertical analysis. 
C) common-size analysis. 
D) trend analysis.

Question 16

A vertical analysis of the income statement calculates each income statement item as a percentage of -----------as reported on that income statement.

Accepted Answer

The answer of A vertical analysis of the income statement...

Question 17

A firm has liabilities of $72,000 and stockholders' equity of $228,000. The percentage of total liabilities to total assets is:

Accepted Answer

A) 25 percent. 
B) 24 percent. 
C) 32 percent. 
D) 76 percent. 
A) 25 percent. 
B) 24 percent. 
C) 32 percent. 
D) 76 percent.

Question 18

If liabilities are $75,000, two-thirds of which represent current liabilities, and total assets are
$500,000, what is the ratio of Stockholders' Equity to Total Equities?

Accepted Answer

A) 10 percent 
B) 6)7 percent 
C) 12.5 percent 
D) 85 percent 
A) 10 percent 
B) 6)7 percent 
C) 12.5 percent 
D) 85 percent

Question 19

Selected financial ratios are given for Canard Industries and Canaille Manufacturing. Both firms have come to your bank and requested loans. You are a loan officer at Noir Bank but can only loan funds to one of the firms. Make your decision based on the information provided. In a short paragraph, explain the basis for the selection you made.

Accepted Answer

Student answers will vary. They should t

Question 20

A common technique for measuring earnings per share requires a company to compute the weighted average shares outstanding during the year.

Accepted Answer

A) True 
 B)False

Exam 23: Financial Statement Analysis

Peterson Company has current liabilities of $210,000 and working capital of $56,000. Its current assets, therefore, must equal $266,000.

Vertical analysis of income statement data most often involves a comparison of each income statement item with:

A horizontal analysis of balance sheet data involves a comparison of a balance sheet amount on a given date with:

Quick assets include cash, receivables, and inventories.

Use the following information for the questions. -Using the information shown, prepare a vertical analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place. (Leave all percentages unadjusted.)

Use the following information . Quotidian Industries Income Statement For the Year Ended June 30, 2020 & 2019 Liabilities and Stockholders' Equity Long-Term Liabilities -Using the information given, analyze the financial strength of Quotidian Industries for 2020.

On a comparative income statement, gross revenues were $310,000, sales returns and allowances were $14,000 and sales discounts amounted to $2,200. Selling expenses of $54,000 were incurred during the year. The vertical analysis would show current year selling expenses as 18.4%.

The rate of return on net sales is a basic measure of operating efficiency and------------

Using the comparative balance sheet given below, prepare a vertical analysis of all asset items. Carry all calculations to two decimal places and then round to one decimal place. (Leave all vertical analysis percentages unadjusted. )

A company reported net income of $96,000. It paid a cash dividend of $32,000 to preferred stockholders. If the company has 16,000 shares of common stock outstanding, earnings per share is----------- .

The current ratio measures a company's ability to pay its current debts using current assets.

If the cost of goods sold is 65 percent of net sales, gross profit on sales would be----------- percent of net sales.

A company had income of $136,000 in 2019 and $210,000 in 2020. The increase in net income from 2019 to 2020 is:

Which of the following is true of horizontal analysis?

If the comparative balance sheet shows the amount and percentage of decrease in merchandise inventory from 2019 to 2020, the firm used:

A vertical analysis of the income statement calculates each income statement item as a percentage of -----------as reported on that income statement.

A firm has liabilities of $72,000 and stockholders' equity of $228,000. The percentage of total liabilities to total assets is:

If liabilities are $75,000, two-thirds of which represent current liabilities, and total assets are $500,000, what is the ratio of Stockholders' Equity to Total Equities?

A common technique for measuring earnings per share requires a company to compute the weighted average shares outstanding during the year.

Accounting: The Language of Business

Analyzing Business Transactions

Analyzing Business Transactions Using T Accounts

The General Journal and the General Ledger

Adjustments and the Worksheet

Closing Entries and Teh Postclosing Trial Balance

Accounting for Sales and Accounts Receivable

Accounting for Purchases and Accounts Payable

Cash Receipts, Cash Payments, and Banking Procedures

Payroll Computations, Records, and Payment

Payroll Taxes, Deposits, and Reports

Accruals, Deferrals, and the Worksheet

Financial Statements and Closing Procedures

Accounting Principles and Reporting Standards

Accounts Receivable and Uncollectible Accounts

Notes Payable and Notes Receivable

Merchandise Inventory

Property, Plant, and Equipment

Accounting for Partnerships

Corporations: Formation and Capital Stock Transactions

Corporate Earnings and Capital Transactions

Long-Term Bonds

The Statement of Cash Flows

Departmentalized Profit and Cost Centers

Accounting for Manufacturing Activities

Job Order Cost Accounting

Process Cost Accounting

Controlling Manufacturing Costs: Standard Costs

Cost-Revenue Analysis for Decision Making

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