Question 1

Merchandise inventory turnover measures the relationship between

Accepted Answer

A) cost of goods sold and merchandise inventory. 
B) expenses and merchandise inventory. 
C) merchandise inventory and current liabilities. 
D) assets and current liabilities. 
A) cost of goods sold and merchandise inventory. 
B) expenses and merchandise inventory. 
C) merchandise inventory and current liabilities. 
D) assets and current liabilities.

Question 2

The reasons for changes in key rations must be analyzed before drawing conclusions.

Accepted Answer

A) True 
 B)False

Question 3

The lower the times interest earned ratio,the more likely:

Accepted Answer

A) a default in payment will occur. 
B) a business needs to borrow money. 
C) a business will suffer a loss. 
D) interest payments can be made. 
A) a default in payment will occur. 
B) a business needs to borrow money. 
C) a business will suffer a loss. 
D) interest payments can be made.

Question 4

The debt in relation to the risk taken by stockholders is measured by:

Accepted Answer

A) debt to stockholders' equity. 
B) gross profit ratio. 
C) rate of return to stockholders. 
D) None of these answers are correct. 
A) debt to stockholders' equity. 
B) gross profit ratio. 
C) rate of return to stockholders. 
D) None of these answers are correct.

Question 5

If management wishes to evaluate the ability of a business to provide funding to cover the operating expenses,they could use the:

Accepted Answer

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

Question 6

For vertical analysis purposes,the base item on an income statement is:

Accepted Answer

A) net income. 
B) net sales. 
C) total expenses. 
D) total sales. 
A) net income. 
B) net sales. 
C) total expenses. 
D) total sales.

Question 7

With a beginning Accounts Receivable balance of $20,000,an ending balance of $26,000,and net credit sales of $408,000,compute accounts receivable turnover ratio.

Accepted Answer

A) 0.05 
B) 20.4 
C) 17.7 
D) 68 
A) 0.05 
B) 20.4 
C) 17.7 
D) 68

Question 8

Noble Company's accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2.This change in accounts receivable turnover indicates:

Accepted Answer

A) the company is not selling its inventory as fast. 
B) the company is selling its inventory faster. 
C) the company's customers are paying faster. 
D) the company's customers are paying slower. 
A) the company is not selling its inventory as fast. 
B) the company is selling its inventory faster. 
C) the company's customers are paying faster. 
D) the company's customers are paying slower.

Question 9

Asset management ratios measure:

Accepted Answer

A) a company's ability to earn a profit. 
B) a company's ability to meet short-term obligations. 
C) how well a company is using debt versus equity. 
D) how effectively a company is using its assets. 
A) a company's ability to earn a profit. 
B) a company's ability to meet short-term obligations. 
C) how well a company is using debt versus equity. 
D) how effectively a company is using its assets.

Question 10

A company has $56,000 in cash,$12,000 in accounts receivable,$25,000 in temporary investments and $100,000 in merchandise inventory.The company has $60,000 in current liabilities.The company's acid test (quick)ratio is:

Accepted Answer

A) 3.217. 
B) 1.550. 
C) 1.133. 
D) 0.933. 
A) 3.217. 
B) 1.550. 
C) 1.133. 
D) 0.933.

Question 11

An accountant is completing a trend analysis for a company by comparing sales for years 2003 through 2013.The base year for the calculations is 2013.

Accepted Answer

A) True 
 B)False

Question 12

A statement comparing data from two or more consecutive periods is called a:

Accepted Answer

A) comparative balance sheet. 
B) comparative income statement. 
C) common-size statement. 
D) both A and B. 
A) comparative balance sheet. 
B) comparative income statement. 
C) common-size statement. 
D) both A and B.

Question 13

The ratio that indicates the amount of assets that are financed by creditors is:

Accepted Answer

A) debt to stockholders' equity. 
B) debt to total retained earnings ratio. 
C) rate of return on common stockholders' equity. 
D) None of the above. 
A) debt to stockholders' equity. 
B) debt to total retained earnings ratio. 
C) rate of return on common stockholders' equity. 
D) None of the above.

Question 14

Define two types of comparative income statements and compare the information provided by them.

Accepted Answer

Horizontal analysis compares items in on

Question 15

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability.
-$$\begin{array} { | l | c | c | c | c | } 
\hline & & \text { Asset } & & \
& \text { Liquidity } & \text { Management } & \text { Debt } & \text { Profitability } \
\hline \text { Times interest earned } & & & & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following items, indicate...

Question 16

Smith Company has the following account balances: $\begin{array} { | l | r | } 
\hline \text { Cash } & \$ 100,000 \
\hline \text { Accounts Receivable } & 30,000 \
\hline \text { Merchandise Inventory } & 250,000 \
\hline \text { Equipment } & 400,000 \
\hline \text { Accounts Payable } & 50,000 \
\hline \text { Bonds Payable } & 300,000 \
\hline
\end{array}$ Calculate Smith Company's current ratio.

Accepted Answer

A) 8.0:1 
B) 7.6:1 
C) 2.2: 
D) 1.1: 
A) 8.0:1 
B) 7.6:1 
C) 2.2: 
D) 1.1:

Question 17

Interest expense was $10,000,income tax expense $20,000,and net income after taxes is $60,000.The number of times interest was earned is:

Accepted Answer

A) 9 times. 
B) 8 times. 
C) 7 times. 
D) 6 times. 
A) 9 times. 
B) 8 times. 
C) 7 times. 
D) 6 times.

Question 18

Explain the following types of ratios:
a.Liquidity
b.Asset management
c.Debt management
d.Profitability

Accepted Answer

a.Liquidity ratios measure a company's a

Question 19

From the following information of Carlson's Restoration Corporation,compute:
a.________ Asset turnover for Year 2.
b.________ Inventory turnover for Year 2.
c.________ Accounts receivable turnover for Year 2.
 $\begin{array}{c}
\begin{array}{lll}
\
 \text { Net Sales (on credit)}\
 \text { Cost of Goods Sold}\
 \text { Net Income}\
 \text { Ending Acct. Receivable}\
 \text { Ending Inventory}\
 \text { Total Assets}
\end{array}
\begin{array}{l}
\underline{ \text { Year } 2} \
\$150,000\
90,000 \
30,000 \
24,000 \
16,500 \
120,000 
\end{array}
\begin{array}{l}
\underline{\text { Year 1 }} \
\$ 120,000 \
84,000 \
24,000 \
21,000 \
13,500 \
135,000
\end{array}
\end{array}$

Accepted Answer

a.1.25 tim

Question 20

The acid test ratio is usually higher than the current ratio.

Accepted Answer

A) True 
 B)False

Exam 22: Analyzing Financial Statements

Merchandise inventory turnover measures the relationship between

The reasons for changes in key rations must be analyzed before drawing conclusions.

The lower the times interest earned ratio,the more likely:

The debt in relation to the risk taken by stockholders is measured by:

If management wishes to evaluate the ability of a business to provide funding to cover the operating expenses,they could use the:

For vertical analysis purposes,the base item on an income statement is:

With a beginning Accounts Receivable balance of $20,000,an ending balance of $26,000,and net credit sales of $408,000,compute accounts receivable turnover ratio.

Noble Company's accounts receivable turnover was 18.2 in Year 1 and 24.6 in Year 2.This change in accounts receivable turnover indicates:

Asset management ratios measure:

A company has $56,000 in cash,$12,000 in accounts receivable,$25,000 in temporary investments and $100,000 in merchandise inventory.The company has $60,000 in current liabilities.The company's acid test (quick)ratio is:

An accountant is completing a trend analysis for a company by comparing sales for years 2003 through 2013.The base year for the calculations is 2013.

A statement comparing data from two or more consecutive periods is called a:

The ratio that indicates the amount of assets that are financed by creditors is:

Define two types of comparative income statements and compare the information provided by them.

For each of the following items, indicate by placing an X in the appropriate column whether it is a measure of: (column 1) liquidity, (column 2) asset management, (column 3) debt, or (column 4) profitability. - Asset Liquidity Management Debt Profitability Times interest earned

Smith Company has the following account balances: Cash \ 100,000 Accounts Receivable 30,000 Merchandise Inventory 250,000 Equipment 400,000 Accounts Payable 50,000 Bonds Payable 300,000 Calculate Smith Company's current ratio.

Interest expense was $10,000,income tax expense $20,000,and net income after taxes is $60,000.The number of times interest was earned is:

Explain the following types of ratios: a.Liquidity b.Asset management c.Debt management d.Profitability

The acid test ratio is usually higher than the current ratio.

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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