Question 1

The return on total assets ratio is a profitability measure.

Accepted Answer

A) True 
 B)False

Question 2

The background on a company,its industry,and its economic setting is usually included in which of the following sections of a financial statement analysis report?

Accepted Answer

A)  Executive summary. 
B)  Analysis overview. 
C)  Evidential conclusions. 
D)  Factor analysis. 
E)  Inferences. 
A)  Executive summary. 
B)  Analysis overview. 
C)  Evidential conclusions. 
D)  Factor analysis. 
E)  Inferences.

Question 3

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet.Its common-size percent for cash equals:

Accepted Answer

A)  .0785%. 
B)  7.85%. 
C)  12.73%. 
D)  1273%. 
E)  7850%. 
A)  .0785%. 
B)  7.85%. 
C)  12.73%. 
D)  1273%. 
E)  7850%.

Question 4

Liquidity refers to the availability of resources to meet short-term cash requirements.

Accepted Answer

A) True 
 B)False

Question 5

Evaluation of company performance does not include analysis of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

Accepted Answer

A) True 
 B)False

Question 6

The comparison of a company's financial condition and performance to a base amount is known as:

Accepted Answer

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

Question 7

Zhang Company reported Cost of goods sold of $835,000 and average Inventory of $41,750.The Inventory turnover ratio is:

Accepted Answer

A)  0.5 times. 
B)  418 times. 
C)  20 times. 
D)  56 times. 
E)  19 times. 
A)  0.5 times. 
B)  418 times. 
C)  20 times. 
D)  56 times. 
E)  19 times.

Question 8

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Accepted Answer

A)  10.6 times 
B)  7.5 times 
C)  4.0 times 
D)  6.5 times 
E)  0.15 times 
A)  10.6 times 
B)  7.5 times 
C)  4.0 times 
D)  6.5 times 
E)  0.15 times

Question 9

Match each of the following terms with the appropriate formulas.
-$\frac{\text { Net sales }}{\text { Average total assets }}$

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 10

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Accepted Answer

A) True 
 B)False

Question 11

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

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 12

Match each of the following terms with the appropriate definitions.
-The availability of resources to meet short-term obligations and to efficiently generate revenues.

Accepted Answer

A) Financial statement analysis 
B) Common-size financial statement 
C) Horizontal analysis 
D) Comparative financial statement 
E) Liquidity and efficiency
F)Market prospects
G)Debt to equity ratio
H)Solvency
I)Vertical analysis
J)Profitability 
A) Financial statement analysis 
B) Common-size financial statement 
C) Horizontal analysis 
D) Comparative financial statement 
E) Liquidity and efficiency
F)Market prospects
G)Debt to equity ratio
H)Solvency
I)Vertical analysis
J)Profitability

Question 13

When an item has a value in the base period and zero in the analysis period,the decrease is 100 percent.

Accepted Answer

A) True 
 B)False

Question 14

What are the four standards for comparisons in financial analysis? Give an example of each.

Accepted Answer

The standards are intra-company comparis

Question 15

Express the following income statement information in common-size percentages (round to nearest whole percent).Comment on the results.
 $\begin{array}{c}
 \text {Haans Corp.}\
 \text {Comparative Income Statements}\
 \text {For Years Ended December 31, 2018 and 2017}\
\begin{array}{|l|c|c|}
\hline&2018&2017\
\hline \text { Sales } & \$1 , 200,000 & \$1 , 000,000 \
\hline \text { Cost of goods sold } &804,000 &  650,000 \
\hline \text { Gross profit } & \$ 396,000 & \$  350,000 \
\hline \text { Selling expenses } &  132,000 &  120,000 \
\hline \text { Administrative expenses } &  180,000 & 150,000 \
\hline\text { Net income }&\$84,000&\$80,000\
\hline
\end{array}
\end{array}$

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 16

$$\begin{array} { | l | r | r | } 
\hline&{ \text { Year 2 } } & { \text { Year 1 } } \
\hline \text { Cash } & \$ 37,500 & 36,850 \
\hline \text { Short-term investments } & 90,000 & 90,000 \
\hline \text { Accounts receivable, net } & 85,500 & 86,250 \
\hline \text { Merchandise inventory } & 121,000 & 117,000 \
\hline \text { Prepaid expenses } & 12,100& 13,500 \
\hline \text { Plant assets } & 388,000 & 392,000 \
\hline \text { Accounts payable } & 113,400 & 111.750 \
\hline \text { Net sales } & 711,000 & 706,000 \
\hline \text { Cost of goods sold } & 390,000 & 385,500 \
\hline
\end{array}$$
-Refer to the following selected financial information from McCormik,LLC.Compute the company's acid-test ratio for Year 2.

Accepted Answer

A)  2.26. 
B)  1.98. 
C)  2.95. 
D)  3.05. 
E)  1.88. 
A)  2.26. 
B)  1.98. 
C)  2.95. 
D)  3.05. 
E)  1.88.

Question 17

Working capital is computed as current liabilities minus current assets.

Accepted Answer

A) True 
 B)False

Question 18

Selected current year end financial information for a company is presented below.Calculate the following company ratios:
(a)Profit margin.
(b)Total asset turnover.
(c)Return on total assets.
(d)Return on common stockholders' equity (assume the company has no preferred stock).
Net income………………………………..$ 325,000
Net sales…………………………………..4,700,000
Total liabilities,beginning-year…………..550,000
Total liabilities,end-of-year……………… 530,000
Total stockholders' equity,beginning-year.760,000
Total stockholders' equity,end-of-year…..745,000

Accepted Answer

(a)Profit margin = ($325,000/$4,700,000)

Question 19

The ability to meet short-term obligations and to efficiently generate revenues is called:

Accepted Answer

A)  Liquidity and efficiency. 
B)  Solvency. 
C)  Profitability. 
D)  Market prospects. 
E)  Creditworthiness. 
A)  Liquidity and efficiency. 
B)  Solvency. 
C)  Profitability. 
D)  Market prospects. 
E)  Creditworthiness.

Question 20

When no value is in the base period,no percent change is computable.

Accepted Answer

A) True 
 B)False

The return on total assets ratio is a profitability measure.

The background on a company,its industry,and its economic setting is usually included in which of the following sections of a financial statement analysis report?

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet.Its common-size percent for cash equals:

Liquidity refers to the availability of resources to meet short-term cash requirements.

Evaluation of company performance does not include analysis of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

The comparison of a company's financial condition and performance to a base amount is known as:

Zhang Company reported Cost of goods sold of $835,000 and average Inventory of $41,750.The Inventory turnover ratio is:

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Match each of the following terms with the appropriate formulas. - $\frac{\text { Net sales }}{\text { Average total assets }}$

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Match each of the following terms with the appropriate definitions. -The availability of resources to meet short-term obligations and to efficiently generate revenues.

When an item has a value in the base period and zero in the analysis period,the decrease is 100 percent.

What are the four standards for comparisons in financial analysis? Give an example of each.

Working capital is computed as current liabilities minus current assets.

The ability to meet short-term obligations and to efficiently generate revenues is called:

When no value is in the base period,no percent change is computable.

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

The return on total assets ratio is a profitability measure.

The background on a company,its industry,and its economic setting is usually included in which of the following sections of a financial statement analysis report?

A corporation reported cash of $14,000 and total assets of $178,300 on its balance sheet.Its common-size percent for cash equals:

Liquidity refers to the availability of resources to meet short-term cash requirements.

Evaluation of company performance does not include analysis of (1)past and current performance, (2)current financial position,and (3)future performance and risk.

The comparison of a company's financial condition and performance to a base amount is known as:

Zhang Company reported Cost of goods sold of $835,000 and average Inventory of $41,750.The Inventory turnover ratio is:

Desjardin Landscaping's income statement reports net income of $75,300,which includes deductions for interest expense of $11,500 and income taxes of $34,900.Its times interest earned is:

Match each of the following terms with the appropriate formulas. - Net sales Average total assets \frac{\text { Net sales }}{\text { Average total assets }} Average total assets Net sales ​

A financial statement analysis report helps to reduce uncertainty in business decisions through a rigorous and sound evaluation.

Match each of the following terms with the appropriate definitions. -The availability of resources to meet short-term obligations and to efficiently generate revenues.

When an item has a value in the base period and zero in the analysis period,the decrease is 100 percent.

What are the four standards for comparisons in financial analysis? Give an example of each.

Working capital is computed as current liabilities minus current assets.

The ability to meet short-term obligations and to efficiently generate revenues is called:

When no value is in the base period,no percent change is computable.

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

Match each of the following terms with the appropriate formulas. - $\frac{\text { Net sales }}{\text { Average total assets }}$