Question 1

Peartree Inc. provides the following extracts from income statement for the year 2015:   Calculate the gross profit percentage.

Accepted Answer

A) 75% 
B) 70% 
C) 55% 
D) 69% 
A) 75% 
B) 70% 
C) 55% 
D) 69% B

Question 2

As per FASB guidelines, earnings per share should appear on the face of the income statement.

Accepted Answer

A) True 
 B)False  True

Question 3

e-Bay Inc. has net sales on account of $1,200,000. The average net accounts receivable are $600,000. Calculate the days' sales in receivables.

Accepted Answer

A) 439.8 days 
B) 304.0 days 
C) 182.5 days 
D) 8.7 days 
A) 439.8 days 
B) 304.0 days 
C) 182.5 days 
D) 8.7 days C

Question 4

Which of the following is the correct formula for calculating the cash ratio?

Accepted Answer

A) Cash ratio = (Cash + Bank)÷ Total liabilities 
B) Cash ratio = (Cash + Cash equivalents)÷ Total current liabilities 
C) Cash ratio = (Cash + Cash equivalents)÷ Total assets 
D) Cash ratio = (Bank + Cash equivalents)÷ Total current liabilities 
A) Cash ratio = (Cash + Bank)÷ Total liabilities 
B) Cash ratio = (Cash + Cash equivalents)÷ Total current liabilities 
C) Cash ratio = (Cash + Cash equivalents)÷ Total assets 
D) Cash ratio = (Bank + Cash equivalents)÷ Total current liabilities

Question 5

A company, reporting a discontinued operation or an extraordinary item, must report earnings per share also for each of these line items.

Accepted Answer

A) True 
 B)False

Question 6

The income statement is also known as the:

Accepted Answer

A) statement of operations. 
B) statement of cash flows. 
C) statement of stockholders' equity. 
D) statement of financial position. 
A) statement of operations. 
B) statement of cash flows. 
C) statement of stockholders' equity. 
D) statement of financial position.

Question 7

e-Bay Inc. provides the following information for the year 2015:   The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock.

Accepted Answer

A) 40 times 
B) 50 times 
C) 35 times 
D) 45 times 
A) 40 times 
B) 50 times 
C) 35 times 
D) 45 times

Question 8

The relationship between total liabilities and total assets is known as the:

Accepted Answer

A) debt ratio. 
B) debt to equity ratio. 
C) current ratio. 
D) earnings per share. 
A) debt ratio. 
B) debt to equity ratio. 
C) current ratio. 
D) earnings per share.

Question 9

Baskins Corporation's accounting records include the following items, listed in no particular order, for the year ending December 31, 2015:   The income tax rate for the company is 45%. Prepare Baskins's income statement for the year ended December 31, 2015. Omit earnings per share.

Accepted Answer

The answer of Baskins Corporation's accounting records include the following...

Question 10

Trend analysis is a form of horizontal analysis.

Accepted Answer

A) True 
 B)False

Question 11

The disposal of a financial segment would be reported as discontinued operations.

Accepted Answer

A) True 
 B)False

Question 12

Partridge Inc. provides the following information for the year 2014:   The company has no preferred stock outstanding. Calculate the dividend yield for common stock.

Accepted Answer

A) 6.67% 
B) 1.67% 
C) 3.67% 
D) 4.67% 
A) 6.67% 
B) 1.67% 
C) 3.67% 
D) 4.67%

Question 13

Days' sales in inventory is a ratio measure that shows how quickly a company can collect its receivables.

Accepted Answer

A) True 
 B)False

Question 14

A summary of significant accounting policies and explanations of specific items on the financial statements will be given in:

Accepted Answer

A) the balance sheet. 
B) the income statement. 
C) notes to financial statements. 
D) the report of independent registered public accounting firm. 
A) the balance sheet. 
B) the income statement. 
C) notes to financial statements. 
D) the report of independent registered public accounting firm.

Question 15

Which of the following statements is true for leverage?

Accepted Answer

A) Assets turnover ratio measures financial leverage. 
B) Leverage always increases profitability. 
C) Leverage is shown in proportion of total assets relative to total equity. 
D) Higher the debt ratio, higher the leverage. 
A) Assets turnover ratio measures financial leverage. 
B) Leverage always increases profitability. 
C) Leverage is shown in proportion of total assets relative to total equity. 
D) Higher the debt ratio, higher the leverage.

Question 16

Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year.

Accepted Answer

A) True 
 B)False

Question 17

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K.

Accepted Answer

A) True 
 B)False

Question 18

The balance sheet of Atlantis Inc. is below:   Calculate working capital for both years.

Accepted Answer

The answer of The balance sheet of Atlantis Inc. is...

Question 19

Data for Atlantis Inc. follow:   Prepare a horizontal analysis of the comparative income statement of Atlantis Inc. Round percentage changes to one decimal place. Use a multiple step format for the income statement.

Accepted Answer

The answer of Data for Atlantis Inc. follow:  ...

Question 20

The trend analysis report of Doppler Inc. is given below:   Which of the following is a correct conclusion from the above analysis?

Accepted Answer

A) Net income for the year 2015 has increased by 115% over that for the year 2013. 
B) Net income for the year 2015 has decreased by 15% over that for the year 2013. 
C) Net income for the year 2015 has decreased by 115% over that for the year 2013 
D) Net income for the year 2015 has increased by 15% over that for the year 2013. 
A) Net income for the year 2015 has increased by 115% over that for the year 2013. 
B) Net income for the year 2015 has decreased by 15% over that for the year 2013. 
C) Net income for the year 2015 has decreased by 115% over that for the year 2013 
D) Net income for the year 2015 has increased by 15% over that for the year 2013.

Exam 17: Financial Statement Analysis

Peartree Inc. provides the following extracts from income statement for the year 2015: Calculate the gross profit percentage.

As per FASB guidelines, earnings per share should appear on the face of the income statement.

e-Bay Inc. has net sales on account of $1,200,000. The average net accounts receivable are $600,000. Calculate the days' sales in receivables.

Which of the following is the correct formula for calculating the cash ratio?

A company, reporting a discontinued operation or an extraordinary item, must report earnings per share also for each of these line items.

The income statement is also known as the:

e-Bay Inc. provides the following information for the year 2015: The company has no preferred stock outstanding. Calculate the price/earnings ratio of common stock.

The relationship between total liabilities and total assets is known as the:

Baskins Corporation's accounting records include the following items, listed in no particular order, for the year ending December 31, 2015: The income tax rate for the company is 45%. Prepare Baskins's income statement for the year ended December 31, 2015. Omit earnings per share.

Trend analysis is a form of horizontal analysis.

The disposal of a financial segment would be reported as discontinued operations.

Partridge Inc. provides the following information for the year 2014: The company has no preferred stock outstanding. Calculate the dividend yield for common stock.

Days' sales in inventory is a ratio measure that shows how quickly a company can collect its receivables.

A summary of significant accounting policies and explanations of specific items on the financial statements will be given in:

Which of the following statements is true for leverage?

Vertical analysis involves comparing each figure in the financial statements with a corresponding figure of the previous year.

A quarterly report filed with the Securities and Exchange Commission is called a Form 10-K.

The balance sheet of Atlantis Inc. is below: Calculate working capital for both years.

Data for Atlantis Inc. follow: Prepare a horizontal analysis of the comparative income statement of Atlantis Inc. Round percentage changes to one decimal place. Use a multiple step format for the income statement.

The trend analysis report of Doppler Inc. is given below: Which of the following is a correct conclusion from the above analysis?

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Partnerships

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

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