Question 1

If management wishes to know how long it takes to collect from a charge customer,they could use the:

Accepted Answer

A) rate of return on total assets. 
B) average collection period. 
C) acid test ratio. 
D) current ratio. 
A) rate of return on total assets. 
B) average collection period. 
C) acid test ratio. 
D) current ratio.

Question 2

The revenue of Carol's Environmental Services for Years 1,2,and 3 are $40,000,$60,000 and $80,000,respectively.Year 1 is the base year.The trend percentage for Year 2 is:

Accepted Answer

A) 50%. 
B) 150%. 
C) 200%. 
D) 133%. 
A) 50%. 
B) 150%. 
C) 200%. 
D) 133%.

Question 3

If management wishes to know how well the inventory is moving for a business,they could use the:

Accepted Answer

A) accounts receivable turnover. 
B) inventory turnover. 
C) acid test ratio. 
D) current ratio. 
A) accounts receivable turnover. 
B) inventory turnover. 
C) acid test ratio. 
D) current ratio.

Question 4

The acid test ratio is the best test to determine the ability to pay short-term debt.

Accepted Answer

A) True 
 B)False

Question 5

An expression of the amount of each item in a statement shown as a percentage of some designated total for purposes of comparison is called:

Accepted Answer

A) horizontal analysis. 
B) earnings per share analysis. 
C) return on total assets. 
D) vertical analysis. 
A) horizontal analysis. 
B) earnings per share analysis. 
C) return on total assets. 
D) vertical analysis.

Question 6

If management wishes to evaluate how effectively the assets of a business are being used,they could use the:

Accepted Answer

A) asset turnover. 
B) rate of return on common stockholders' equity. 
C) acid test ratio. 
D) debt to total stockholders' equity. 
A) asset turnover. 
B) rate of return on common stockholders' equity. 
C) acid test ratio. 
D) debt to total stockholders' equity.

Question 7

The ratio that indicates how much profit is generated from each sales dollar to cover general and selling expenses is:

Accepted Answer

A) gross profit rate. 
B) return on sales. 
C) rate of return on total assets. 
D) rate of return on common stockholders' equity. 
A) gross profit rate. 
B) return on sales. 
C) rate of return on total assets. 
D) rate of return on common stockholders' equity.

Question 8

Liquidity ratios measure:

Accepted Answer

A) how effectively a company is using its equity. 
B) how effectively a company is using its liabilities. 
C) a company's ability to pay shareholders. 
D) a company's ability to pay off short-term debts. 
A) how effectively a company is using its equity. 
B) how effectively a company is using its liabilities. 
C) a company's ability to pay shareholders. 
D) a company's ability to pay off short-term debts.

Question 9

Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500.

Accepted Answer

A) 51:10 
B) 54% 
C) 51% 
D) 54:10 
A) 51:10 
B) 54% 
C) 51% 
D) 54:10

Question 10

Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

Accepted Answer

A) True 
 B)False

Question 11

To be meaningful,a small business should compare ratios with large companies.

Accepted Answer

A) True 
 B)False

Question 12

The net sales for James,Inc.were $4,000,000; net income was $510,000; and gross profit was $1,300,000.The return on sales ratio would be:

Accepted Answer

A) 12.75%. 
B) 32.50%. 
C) 45.25%. 
D) 39.23%. 
A) 12.75%. 
B) 32.50%. 
C) 45.25%. 
D) 39.23%.

Question 13

Common-size statements deal with the percentage of change in a certain item over several years.

Accepted Answer

A) True 
 B)False

Question 14

Meranda Flower Corporation needs to develop a trend analysis for its sales and gross profit for the past three years to make decisions for the future.Compute the trend percentages with the information below and place your answers in the spaces provided.
$\begin{array} { l r r r } & \text { Year 3 } & \text { Year 2 } & \text { Year 1 } \ \text { Net sales } & \$ 1,600 & \$ 1,100 & \$ 800 \ \text { Gross profit } & 750 & 400 & 250 \
\
\text {Net sales trend percentages}&----&----&-----\
\text {Gross profit trend percentages}&----&----&-----
\end{array}$

Accepted Answer

The answer of Meranda Flower Corporation needs to develop a...

Question 15

Compute the gross profit rate when sales are $400,000; net sales are $380,000 and gross profits are $125,000.

Accepted Answer

A) 31.25% 
B) 32.89% 
C) 0.3125 to 1 
D) 0.3289 to 1 
A) 31.25% 
B) 32.89% 
C) 0.3125 to 1 
D) 0.3289 to 1

Question 16

For trend analysis to work correctly,the accountant uses the:

Accepted Answer

A) beginning percentage. 
B) base year. 
C) common-size statement. 
D) horizontal analysis. 
A) beginning percentage. 
B) base year. 
C) common-size statement. 
D) horizontal analysis.

Question 17

Isaiah Company has net income before interest and taxes of $720,000; beginning total assets of $2,100,000; and ending total assets of $2,300,000.Isaiah's return on total assets is:

Accepted Answer

A) 32.7%. 
B) 11.2%. 
C) 3.1%. 
D) 31.3%. 
A) 32.7%. 
B) 11.2%. 
C) 3.1%. 
D) 31.3%.

Question 18

The lower the times interest earned ratio,the more likely it is that interest payments will not be made.

Accepted Answer

A) True 
 B)False

Question 19

The debt-to-equity ratio measures the extent of (or proportion of)borrowed capital to equity,with which a business operates.

Accepted Answer

A) True 
 B)False

Question 20

The current ratio for a company with current assets of $70,000,current liabilities of $50,000,total assets of $150,000,and net sales of $80,000,would be:

Accepted Answer

A) 1.4. 
B) 0.714. 
C) 3.0. 
D) 0.875. 
A) 1.4. 
B) 0.714. 
C) 3.0. 
D) 0.875.

Exam 22: Analyzing Financial Statements

If management wishes to know how long it takes to collect from a charge customer,they could use the:

The revenue of Carol's Environmental Services for Years 1,2,and 3 are $40,000,$60,000 and $80,000,respectively.Year 1 is the base year.The trend percentage for Year 2 is:

If management wishes to know how well the inventory is moving for a business,they could use the:

The acid test ratio is the best test to determine the ability to pay short-term debt.

An expression of the amount of each item in a statement shown as a percentage of some designated total for purposes of comparison is called:

If management wishes to evaluate how effectively the assets of a business are being used,they could use the:

The ratio that indicates how much profit is generated from each sales dollar to cover general and selling expenses is:

Liquidity ratios measure:

Compute the gross profit rate when net sales are $350,000 and gross profits are $178,500.

Using just a base year and one additional year is not sufficient to do a long-term trend analysis of accounts.

To be meaningful,a small business should compare ratios with large companies.

The net sales for James,Inc.were $4,000,000; net income was $510,000; and gross profit was $1,300,000.The return on sales ratio would be:

Common-size statements deal with the percentage of change in a certain item over several years.

Compute the gross profit rate when sales are $400,000; net sales are $380,000 and gross profits are $125,000.

For trend analysis to work correctly,the accountant uses the:

Isaiah Company has net income before interest and taxes of $720,000; beginning total assets of $2,100,000; and ending total assets of $2,300,000.Isaiah's return on total assets is:

The lower the times interest earned ratio,the more likely it is that interest payments will not be made.

The debt-to-equity ratio measures the extent of (or proportion of)borrowed capital to equity,with which a business operates.

The current ratio for a company with current assets of $70,000,current liabilities of $50,000,total assets of $150,000,and net sales of $80,000,would be:

Accounting Concepts and Procedures

Debits and Credits: Analyzing and Recording Business Transactions

Beginning the Accounting Cycle

The Accounting Cycle Continued

The Accounting Cycle Completed

Banking Procedure and Control of Cash

Calculating Pay and Payroll Taxes: The Beginning of the Payroll Process

Paying,recording,and Reporting Payroll and Payroll Taxes: The Conclusion of the Payroll Process

Sales and Cash Receipts

Purchases and Cash Payments

Preparing a Worksheet for a Merchandise Company

Completion of the Accounting Cycle for a Merchandise Company

Accounting for Bad Debts

Notes Receivable and Notes Payable

Accounting for Merchandise Inventory

Accounting for Property, plant, equipment, and Intangible Assets

Partnership

Corporations: Organizations and Stock

Corporations: Stock Values, dividends, treasury Stocks, and Retained Earnings

Corporations and Bonds Payable

Statement of Cash Flows

The Voucher System

Departmental Accounting

Manufacturing Accounting

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