Question 1

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Accepted Answer

A) Decrease. 
B) Increase. 
C) Remain the same. 
D) Cannot be determined. 
A) Decrease. 
B) Increase. 
C) Remain the same. 
D) Cannot be determined.

Question 2

Select the incorrect statement regarding the information disclosed in financial statements.

Accepted Answer

A) The costs of providing all possible information about a firm would be prohibitively high for the business. 
B) Some information disclosed in financial statements may be irrelevant to some users. 
C) Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D) When too much information is presented users may suffer from information overload. 
A) The costs of providing all possible information about a firm would be prohibitively high for the business. 
B) Some information disclosed in financial statements may be irrelevant to some users. 
C) Financial statements should be detailed enough to answer any financial-related question an investor might have. 
D) When too much information is presented users may suffer from information overload.

Question 3

Select the correct statement regarding vertical analysis.

Accepted Answer

A) Vertical analysis of the income statement involves showing each item as a percentage of sales. 
B) Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets. 
C) Vertical analysis examines two or more items from the financial statements of one accounting period. 
D) All of these answer choices are correct. 
A) Vertical analysis of the income statement involves showing each item as a percentage of sales. 
B) Vertical analysis of the balance sheet involves showing each asset as a percentage of total assets. 
C) Vertical analysis examines two or more items from the financial statements of one accounting period. 
D) All of these answer choices are correct.

Question 4

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Accepted Answer

A) Decrease. 
B) Increase. 
C) Remain the same. 
D) Cannot be determined. 
A) Decrease. 
B) Increase. 
C) Remain the same. 
D) Cannot be determined.

Question 5

Which of the following statements is correct?

Accepted Answer

A) The most widely quoted measure of a company's earnings performance is return on equity. 
B) Earnings per share is calculated for a company's preferred stock. 
C) Investors need to understand that the value of a company's earnings per share is affected by its choices of accounting principles and assumptions. 
D) The book value per share measures the market value of a corporation's stock. 
A) The most widely quoted measure of a company's earnings performance is return on equity. 
B) Earnings per share is calculated for a company's preferred stock. 
C) Investors need to understand that the value of a company's earnings per share is affected by its choices of accounting principles and assumptions. 
D) The book value per share measures the market value of a corporation's stock.

Question 6

The following balance sheet information is provided for Frederick Company:
The company's quick (acid-test)ratio is closest to:

Accepted Answer

A) 0.9 
B) 1.4 
C) 1.1 
D) 2.3 
A) 0.9 
B) 1.4 
C) 1.1 
D) 2.3

Question 7

Indicate whether each of the following statements about financial statement analysis is true or false.
_____ a)Ratio analysis may involve studying relationships between an item reported on the balance sheet and another reported on the income statement.
_____ b)Comparing sales in 2015 with sales for 2014 is a form of horizontal analysis.
_____ c)Comparing net income in 2015 with sales for 2015 is a form of vertical analysis.
_____ d)Liquidity ratios measure a company's ability to generate profits in the short term.
_____ e)Working capital is calculated by using the following formula: quick assets - current liabilities.

Accepted Answer

a)True b)T

Question 8

Chastain Company's current ratio for 2015 was 1.42,which was slightly above the current ratio for similar companies in its industry.Chastain's quick ratio for 2015 was 0.68,which is substantially lower than for similar companies in its industry.What conclusion would you reach based on this information?

Accepted Answer

The primary difference between the curre

Question 9

The following balance sheet information was provided by Warner Company:
Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Accepted Answer

A) 9 days 
B) 44 days 
C) 71 days 
D) 40 days 
A) 9 days 
B) 44 days 
C) 71 days 
D) 40 days

Question 10

Which of the following statements is generally incorrect?

Accepted Answer

A) A 30-day average collection period for accounts receivable is generally preferred over a 20-day average collection period. 
B) A 2:1 current ratio is generally preferred over a 1:1 current ratio. 
C) A 5% dividend yield is generally preferred over a 3% dividend yield. 
D) A 10% net margin is generally preferred over an 8% net margin. 
A) A 30-day average collection period for accounts receivable is generally preferred over a 20-day average collection period. 
B) A 2:1 current ratio is generally preferred over a 1:1 current ratio. 
C) A 5% dividend yield is generally preferred over a 3% dividend yield. 
D) A 10% net margin is generally preferred over an 8% net margin.

Question 11

Describe the factors involved in communicating useful financial information.

Accepted Answer

The primary factors involved in communic

Question 12

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

Accepted Answer

The primary drawback is that absolute am

Question 13

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

Accepted Answer

A) True 
 B)False

Question 14

The quick ratio,although similar to the current ratio,is more conservative.

Accepted Answer

A) True 
 B)False

Question 15

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Accepted Answer

A) 3,14 times 
B) 1.57 times 
C) 1.60 times 
D) 0.64 times 
A) 3,14 times 
B) 1.57 times 
C) 1.60 times 
D) 0.64 times

Question 16

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

Accepted Answer

A) Increase it 
B) Decrease it 
C) No impact 
D) Not enough information is provided to answer the question. 
A) Increase it 
B) Decrease it 
C) No impact 
D) Not enough information is provided to answer the question.

Question 17

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Accepted Answer

A) Current ratio. 
B) Earnings per share. 
C) Inventory turnover. 
D) Average collection period. 
A) Current ratio. 
B) Earnings per share. 
C) Inventory turnover. 
D) Average collection period.

Question 18

Which of the following statements about financial statement analysis is incorrect?

Accepted Answer

A) In horizontal percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements. 
B) Vertical analysis compares two or more financial statement items within the same time period. 
C) Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year. 
D) The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis. 
A) In horizontal percentage analysis,an item from the financial statements is expressed as a percentage of the same item from a previous year's financial statements. 
B) Vertical analysis compares two or more financial statement items within the same time period. 
C) Horizontal analysis for several years can be done by choosing one year as a base year and calculating increases or decreases in relation to that year. 
D) The reason behind a financial statement ratio or percentage analysis result is usually self-evident and does not require further study or analysis.

Question 19

Short-term creditors are usually most interested in assessing:

Accepted Answer

A) Liquidity. 
B) Solvency. 
C) Managerial effectiveness 
D) Profitability. 
A) Liquidity. 
B) Solvency. 
C) Managerial effectiveness 
D) Profitability.

Question 20

In vertical analysis,each item is expressed as a percentage of:

Accepted Answer

A) Total cash on the balance sheet. 
B) Total assets on the balance sheet. 
C) Total current assets on the balance sheet. 
D) None of these answer choices are correct. 
A) Total cash on the balance sheet. 
B) Total assets on the balance sheet. 
C) Total current assets on the balance sheet. 
D) None of these answer choices are correct.

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Select the incorrect statement regarding the information disclosed in financial statements.

Select the correct statement regarding vertical analysis.

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Which of the following statements is correct?

The following balance sheet information is provided for Frederick Company: The company's quick (acid-test)ratio is closest to:

The following balance sheet information was provided by Warner Company: Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Which of the following statements is generally incorrect?

Describe the factors involved in communicating useful financial information.

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

The quick ratio,although similar to the current ratio,is more conservative.

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Which of the following statements about financial statement analysis is incorrect?

Short-term creditors are usually most interested in assessing:

In vertical analysis,each item is expressed as a percentage of:

An Introduction to Accounting

Understanding the Accounting Cycle

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Filters

Exam 13: Financial Statement Analysis

Blumenthal Company received cash of $600,000 from issuing common stock.As a result of this transaction,the company's debt to equity ratio will:

Select the incorrect statement regarding the information disclosed in financial statements.

Select the correct statement regarding vertical analysis.

Blumenthal Company declared and paid a cash dividend totaling $50,000 on its common stock.As a result of this transaction,the company's debt to assets ratio will:

Which of the following statements is correct?

The following balance sheet information is provided for Frederick Company: The company's quick (acid-test)ratio is closest to:

The following balance sheet information was provided by Warner Company: Assume 2015 net credit sales totaled $150,000.The company's average days to collect receivables is closest to:

Which of the following statements is generally incorrect?

Describe the factors involved in communicating useful financial information.

What is a primary drawback with examining and comparing absolute amounts from two businesses' financial statements?

The drawback of studying absolute amounts reported in financial statements is the problem of differing materiality levels.

The quick ratio,although similar to the current ratio,is more conservative.

The Monticello Company reported gross sales of $800,000,sales returns and allowances of $5,000 and sales discounts of $10,000.The company has total average assets of $500,000,of which $250,000 is property,plant,and equipment.What is the company's asset turnover ratio?

Richmond Company collected $400 on account.What impact will this transaction have on the firm's current ratio?

All of the following are considered to be measures of a company's short-term debt-paying ability except:

Which of the following statements about financial statement analysis is incorrect?

Short-term creditors are usually most interested in assessing:

In vertical analysis,each item is expressed as a percentage of:

An Introduction to Accounting

Understanding the Accounting Cycle

The Double-Entry Accounting System

Accounting for Merchandising Businesses

Accounting for Inventories

Internal Control and Accounting for Cash

Accounting for Receivables

Accounting for Long-Term Operational Assets

Accounting for Current Liabilities and Payroll

Accounting for Long-Term Debt

Proprietorships,partnerships,and Corporations

Statement of Cash Flows

Filters