Question 1

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long- term basis?

Accepted Answer

A) Ratio of fixed assets to long-term liabilities 
B) Ratio of net sales to assets 
C) Number of days' sales in receivables 
D) Rate earned on stockholders' equity 
A) Ratio of fixed assets to long-term liabilities 
B) Ratio of net sales to assets 
C) Number of days' sales in receivables 
D) Rate earned on stockholders' equity

Question 3

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year,there has been an acceleration in the collection of receivables.

Accepted Answer

A) True 
 B)False

Question 4

Current position analysis indicates a company's ability to liquidate current liabilities.

Accepted Answer

A) True 
 B)False

Question 5

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

Accepted Answer

A) True 
 B)False

Question 6

Solvency analysis focuses on the ability of a business to make a profit.

Accepted Answer

A) True 
 B)False

Question 7

The ratio of current assets to current liabilities is referred to as the acid-test ratio.

Accepted Answer

A) True 
 B)False

Question 8

The rate earned on total assets is one of the measures of profitability.

Accepted Answer

A) True 
 B)False

Question 9

The comparison of the financial data of a single company for two or more years is called horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 10

In computing the rate earned on total assets,interest expense is added to net income before dividing by average total assets.

Accepted Answer

A) True 
 B)False

Question 11

"Working capital" is another term for the current ratio.

Accepted Answer

A) True 
 B)False

Question 12

Profitability refers to the ability of the business to:

Accepted Answer

A) earn a reasonable amount of income. 
B) provide owners with dividends. 
C) pay its current and noncurrent liabilities. 
D) manage its accounts receivable and inventory. 
A) earn a reasonable amount of income. 
B) provide owners with dividends. 
C) pay its current and noncurrent liabilities. 
D) manage its accounts receivable and inventory.

Question 13

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:

Accepted Answer

A) solvency and leverage. 
B) solvency and profitability. 
C) solvency and liquidity. 
D) solvency and equity. 
A) solvency and leverage. 
B) solvency and profitability. 
C) solvency and liquidity. 
D) solvency and equity.

Question 14

The excess of current liabilities over quick assets is referred to as working capital.

Accepted Answer

A) True 
 B)False

Question 15

If a company has issued only one class of stock,the earnings per share is determined by dividing net income by the number of shares outstanding.

Accepted Answer

A) True 
 B)False

Question 16

Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.

Accepted Answer

A) True 
 B)False

Question 17

A balance sheet shows cash,$75,000; marketable securities,$110,000; receivables,$90,000; and $225,000 of inventories.Current liabilities are $200,000.The current ratio is 1.375 to 1.

Accepted Answer

A) True 
 B)False

Question 18

The following data are taken from the financial statements:

Accepted Answer

(a) Current Preceding Year Year (1)Inven

Question 19

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 20

The number of days' sales in inventory is one means of expressing the relationship between net sales and accounts receivable.

Accepted Answer

A) True 
 B)False

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long- term basis?

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year,there has been an acceleration in the collection of receivables.

Current position analysis indicates a company's ability to liquidate current liabilities.

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

Solvency analysis focuses on the ability of a business to make a profit.

The ratio of current assets to current liabilities is referred to as the acid-test ratio.

The rate earned on total assets is one of the measures of profitability.

The comparison of the financial data of a single company for two or more years is called horizontal analysis.

In computing the rate earned on total assets,interest expense is added to net income before dividing by average total assets.

"Working capital" is another term for the current ratio.

Profitability refers to the ability of the business to:

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:

The excess of current liabilities over quick assets is referred to as working capital.

If a company has issued only one class of stock,the earnings per share is determined by dividing net income by the number of shares outstanding.

Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.

A balance sheet shows cash,$75,000; marketable securities,$110,000; receivables,$90,000; and $225,000 of inventories.Current liabilities are $200,000.The current ratio is 1.375 to 1.

The following data are taken from the financial statements:

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

The number of days' sales in inventory is one means of expressing the relationship between net sales and accounts receivable.

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters

Exam 9: Financial Statement Analysis

The percentage analysis of increases and decreases in corresponding items in comparative financial statements is referred to as horizontal analysis.

Which of the following ratios provides a solvency measure that shows the margin of safety of noteholders or bondholders and also gives an indication of the potential ability of the business to borrow additional funds on a long- term basis?

If the accounts receivable turnover for the current year has decreased when compared with the ratio for the preceding year,there has been an acceleration in the collection of receivables.

Current position analysis indicates a company's ability to liquidate current liabilities.

The effects of differences in accounting methods are of little importance when analyzing comparable data from competing businesses.

Solvency analysis focuses on the ability of a business to make a profit.

The ratio of current assets to current liabilities is referred to as the acid-test ratio.

The rate earned on total assets is one of the measures of profitability.

The comparison of the financial data of a single company for two or more years is called horizontal analysis.

In computing the rate earned on total assets,interest expense is added to net income before dividing by average total assets.

"Working capital" is another term for the current ratio.

Profitability refers to the ability of the business to:

The ability of a business to pay its debts as they come due and to earn a reasonable amount of income is referred to as:

The excess of current liabilities over quick assets is referred to as working capital.

If a company has issued only one class of stock,the earnings per share is determined by dividing net income by the number of shares outstanding.

Statements in which all items are expressed as percentages with no dollar amounts are called common-sized statements.

A balance sheet shows cash,$75,000; marketable securities,$110,000; receivables,$90,000; and $225,000 of inventories.Current liabilities are $200,000.The current ratio is 1.375 to 1.

The following data are taken from the financial statements:

The relationship of each asset item as a percent of total assets is an example of horizontal analysis.

The number of days' sales in inventory is one means of expressing the relationship between net sales and accounts receivable.

The Role of Accounting in Business

Basic Accounting Concepts

Accrual Accounting Concepts

Accounting for Merchandising Businesses

Sarbanes-Oxley, internal Control, and Cash

Receivables and Inventories

Fixed Assets and Intangible Assets

Liabilities and Stockholders Equity

Accounting Systems for Manufacturing Businesses

Cost Behavior and Cost-Volume-Profit Analysis

Differential Analysis and Product Pricing

Budgeting and Standard Cost Systems

Performance Evaluation for Decentralized Operations

Capital Investment Analysis

Filters