Question 1

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Accepted Answer

Financial statement analysis

Question 2

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in both dollar amounts and percentages,are referred to as:

Accepted Answer

A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements. 
A)  Period-to-period statements. 
B)  Controlling statements. 
C)  Successive statements. 
D)  Comparative statements. 
E)  Serial statements. D

Question 3

The dollar change for a comparative financial statement item is calculated by:

Accepted Answer

A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis amount, then dividing the result by the base amount. 
A)  Subtracting the analysis period amount from the base period amount. 
B)  Subtracting the base period amount from the analysis period amount. 
C)  Subtracting the analysis period amount from the base period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
D)  Subtracting the base period amount from the analysis period amount, dividing the result by the base period amount, then multiplying that amount by 100. 
E)  Subtracting the base period amount from the analysis amount, then dividing the result by the base amount. B

Question 4

$$\begin{array} { | l | r | r | } 
\hline & { \text { Year 2 } } & \text { Year 1 } \
\hline \text { Net sales } & \$ 478,500 & \$ 426,250 \
\hline \text { Cost of goods sold } & 276,300 & 250,120 \
\hline \text { Interest expense } & 9,700 & 10,700 \
\hline \text { Net income before tax } & 67,250 & 52,680 \
\hline \text { Net income after tax } & 46,050 & 39,900 \
\hline \text { Total assets } & 317,100 & 288,000 \
\hline \text { Total liabilities } & 181,400 & 167,300 \
\hline \text { Total equity } & 135,700 & 120,700 \
\hline
\end{array}$$
-Refer to the following selected financial information from Shakley's Incorporated.Compute the company's return on total assets for Year 2.

Accepted Answer

A)  9.6%. 
B)  15.2%. 
C)  2.6%. 
D)  22.2%. 
E)  14.5%. 
A)  9.6%. 
B)  15.2%. 
C)  2.6%. 
D)  22.2%. 
E)  14.5%.

Question 5

A corporation reported cash of $14,000 and total assets of $178,300.Its common-size percent for cash equals 7.85%.

Accepted Answer

A) True 
 B)False

Question 6

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

Accepted Answer

A) True 
 B)False

Question 7

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa),a meaningful percent change cannot be calculated.

Accepted Answer

A) True 
 B)False

Question 8

Standards for comparison are not generally necessary when making judgments about a company's performance.

Accepted Answer

A) True 
 B)False

Question 9

The comparison of a company's financial condition and performance across time is known as:

Accepted Answer

A)  Horizontal analysis. 
B)  Vertical analysis. 
C)  Political analysis. 
D)  Financial reporting. 
E)  Investment analysis. 
A)  Horizontal analysis. 
B)  Vertical analysis. 
C)  Political analysis. 
D)  Financial reporting. 
E)  Investment analysis.

Question 10

The current ratio is calculated as current liabilities divided by current assets.

Accepted Answer

A) True 
 B)False

Question 11

Profitability is the ability to generate future revenues and meet long-term obligations.

Accepted Answer

A) True 
 B)False

Question 12

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what is the revenue trend percent for Years 2 and 3?

Accepted Answer

A)  80% for Year 2 and 90% for Year 3. 
B)  88% for Year 2 and 80% for Year 3. 
C)  88% for Year 2 and 90% for Year 3. 
D)  112.5% for Year 2 and 125% for Year 3. 
E)  125% for Year 2 and 112.5% for Year 3. 
A)  80% for Year 2 and 90% for Year 3. 
B)  88% for Year 2 and 80% for Year 3. 
C)  88% for Year 2 and 90% for Year 3. 
D)  112.5% for Year 2 and 125% for Year 3. 
E)  125% for Year 2 and 112.5% for Year 3.

Question 13

Match each of the following terms with the appropriate formulas.
-$\frac {\text {  Net income - Preferred dividends}} { \text { Average common stockholders' equity} }$

Accepted Answer

A) Debt ratio 
B) Days' sales in inventory 
C) Return on common stockholders' equity 
D) Inventory turnover 
E) Dividend yield
F)Days' sales uncollected
G)Profit margin ratio
H)Gross margin ratio
I)Times interest earned
J)Total asset turnover 
A) Debt ratio 
B) Days' sales in inventory 
C) Return on common stockholders' equity 
D) Inventory turnover 
E) Dividend yield
F)Days' sales uncollected
G)Profit margin ratio
H)Gross margin ratio
I)Times interest earned
J)Total asset turnover

Question 14

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.

Accepted Answer

A) True 
 B)False

Question 15

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows,and (5)notes to these statements.

Accepted Answer

A) True 
 B)False

Question 16

$$\begin{array} { | l | r | } 
\hline \text { Current assets } & 306,450 \
\hline \text { Plant assets } & 388,000 \
\hline \text { Current Liabilities } & 107,800 \
\hline \text { Net sales } & 676,000 \
\hline \text { Net Income } & 75,000 \
\hline
\end{array}$$
-Refer to the following selected financial information from Frankle Corp.Compute the company's current ratio.

Accepted Answer

A)  6.44. 
B)  2.84. 
C)  6.27. 
D)  3.60. 
E)  1.44. 
A)  6.44. 
B)  2.84. 
C)  6.27. 
D)  3.60. 
E)  1.44.

Question 17

A corporation reports the following year-end balance sheet data.The company's debt-to-equity ratio equals:
$$\begin{array} { | l | r |l |r | } 
\hline \text { Cash } & \$ 40,000 & \text { Current liabilities } & \$ 75,000 \
\hline \text { Accounts receivable } & 55,000 & \text { Long-term liabilities } & 35,000 \
\hline \text { Inventory } & 60,000 & \text { Common stock } & 100,000 \
\hline \text { Equipment } & 145,000 & \text { Retained earnings } & 90,000 \
\hline \text { Total assets } & \$ 300,000 & \text { Total liabilities and equity } & \$ 300,000 \
\hline
\end{array}$$

Accepted Answer

A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63 
A)  0.58 
B)  1.27 
C)  2.07 
D)  0.37 
E)  0.63

Question 18

All of the following are true of a financial statement analysis report,except:

Accepted Answer

A)  Contains ambiguities and qualifications. 
B)  Forces preparers to organize their reasoning and to verify the logic of analysis. 
C)  Serves as a method of communication to users. 
D)  Helps users and preparers to refine conclusions based on evidence from key building blocks. 
E)  Enables readers to see the process and rationale of analysis. 
A)  Contains ambiguities and qualifications. 
B)  Forces preparers to organize their reasoning and to verify the logic of analysis. 
C)  Serves as a method of communication to users. 
D)  Helps users and preparers to refine conclusions based on evidence from key building blocks. 
E)  Enables readers to see the process and rationale of analysis.

Question 19

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Accepted Answer

A)  Asset comparative statements. 
B)  Percentage comparative statements. 
C)  Common-size comparative statements. 
D)  Sales comparative statements. 
E)  General-purpose financial statements. 
A)  Asset comparative statements. 
B)  Percentage comparative statements. 
C)  Common-size comparative statements. 
D)  Sales comparative statements. 
E)  General-purpose financial statements.

Question 20

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accepted Answer

A) True 
 B)False

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in both dollar amounts and percentages,are referred to as:

The dollar change for a comparative financial statement item is calculated by:

A corporation reported cash of $14,000 and total assets of $178,300.Its common-size percent for cash equals 7.85%.

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa),a meaningful percent change cannot be calculated.

Standards for comparison are not generally necessary when making judgments about a company's performance.

The comparison of a company's financial condition and performance across time is known as:

The current ratio is calculated as current liabilities divided by current assets.

Profitability is the ability to generate future revenues and meet long-term obligations.

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what is the revenue trend percent for Years 2 and 3?

Match each of the following terms with the appropriate formulas. - $\frac {\text { Net income - Preferred dividends}} { \text { Average common stockholders' equity} }$

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows,and (5)notes to these statements.

Current assets 306,450 Plant assets 388,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000 -Refer to the following selected financial information from Frankle Corp.Compute the company's current ratio.

All of the following are true of a financial statement analysis report,except:

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Time Value of Money

Investments

Partnership Accounting

Filters

Exam 13: Analysis of Financial Statements

________ applies analytical tools to general-purpose financial statements and related data for making business decisions.

Financial statements with data for two or more successive accounting periods placed in columns side by side,sometimes with changes shown in both dollar amounts and percentages,are referred to as:

The dollar change for a comparative financial statement item is calculated by:

A corporation reported cash of $14,000 and total assets of $178,300.Its common-size percent for cash equals 7.85%.

Vertical analysis is used to reveal patterns in data covering two or more successive periods.

When a negative amount is in the base period and a positive amount is in the analysis period (or vice versa),a meaningful percent change cannot be calculated.

Standards for comparison are not generally necessary when making judgments about a company's performance.

The comparison of a company's financial condition and performance across time is known as:

The current ratio is calculated as current liabilities divided by current assets.

Profitability is the ability to generate future revenues and meet long-term obligations.

Ash Company reported sales of $400,000 for Year 1,$450,000 for Year 2,and $500,000 for Year 3.Using Year 1 as the base year,what is the revenue trend percent for Years 2 and 3?

A good financial statement analysis report often includes the following sections: executive summary,analysis overview,evidential matter,assumptions,key factors,and inferences.

General-purpose financial statements include the (1)income statement, (2)balance sheet, (3)statement of stockholders' equity (or statement of retained earnings), (4)statement of cash flows,and (5)notes to these statements.

Current assets 306,450 Plant assets 388,000 Current Liabilities 107,800 Net sales 676,000 Net Income 75,000 -Refer to the following selected financial information from Frankle Corp.Compute the company's current ratio.

All of the following are true of a financial statement analysis report,except:

Comparative financial statements in which each individual financial statement amount is expressed as a percentage of a base amount are called:

Measures taken from a selected competitor or a group of competitors are often excellent standards of comparison for analysis.

Accounting in Business

Analyzing for Business Transactions

Adjusting Accounts for Financial Statements

Accounting for Merchandising Operations

Inventories and Cost of Sales

Cash, fraud, and Internal Controls

Accounting for Receivables

Accounting for Long-Term Assets

Accounting for Current Liabilities

Accounting for Long-Term Liabilities

Corporate Reporting and Analysis

Reporting Cash Flows

Time Value of Money

Investments

Partnership Accounting

Filters